Siberian chaga mushroom appears as a black mass on birch trees, dead or alive. Occasionally, it may also be seen growing on hornbeam, ash, elm or beech.
In Europe and Asia, chaga has been used for centuries to treat cancers of the heart and liver, digestive ailments, and tuberculosis. 
The black "skin" was removed and the lighter inside boiled as tea. Being such a compact natural medicine made it a valuable, portable remedy for healers of old.
Modern research on chaga has mainly focused on its potential application as an anti-cancer remedy. In Russia, this usage was already approved as early as 1955 to treat lung, stomach, breast and cervical cancers. 
A modern study conducted in 1998 showed that chaga extract does indeed inhibit the growth of cervical cancer cells under laboratory conditions.  Another study from the mid-90's found the active compound betulin to cause growth inhibition and death of melanoma cells, also in lab. [124, 25]
Other research papers also confirm that some of the active compounds of chaga help retard the growth of cancer cells. [125, 126]
Betulin is a medically active compound from the birch tree that gets concentrated in the black outer skin of the chaga mushroom, which has been found to contain 30% betulin,  whereas the inside of the chaga mushroom contains fungal lanostanes. It would therefore be suggested that chaga tea is better made from the whole mushroom, including the black skin.
Better yet are chaga extracts made with both the mycelium ("root") and the whole mushroom fruit body. The mycelium is richer in medicinally active proteins than the mushroom itself.
Research on chaga has also reported potent anti-viral properties. Two studies on influenza virus  and HIV  were published with positive results in 1996. Chaga probably works on viruses indirectly by enhancing the human immune system, as indicated by two papers published in 2002 and 2005. [25, 129] Historical use of chaga as an anti-inflammatory may be attributed to that same mechanism. 
Furthermore, alcohol extract of chaga mushroom has been found to lower blood sugar levels.  Chaga also demonstrates significant antioxidant properties that help protect the genetic integrity of the cells. [132, 133]
As an interesting anecdote that does not relate to human health but demonstrates the curative power of the Chaga mushroom, Paul Stamets mentions a Quebec arborist who uses a chaga poultice to cure chestnut blight. It not only cures the infection but the tree even becomes blight resistant after treatment. 
Note: The statements on this page have not been evaluated by the Food and Drug Administration. This article is not intended to diagnose, treat, cure or prevent any disease. Always consult a licensed medical practitioner before using any herb (or mushroom) for medicinal purposes.
Credit to Paul Stamets for research and source material.