The first sake was called omiki, the alcohol of the gods. This is because the Japanese believed there were two gods who ruled the world: Nigimitama and Aramitama. Nigimitama gave to villagers a peaceful life while Aramitama was their source of suffering. The Japanese offered sake to both gods, to one in thanks and to the other in appeasement. They would also drink it themselves because they believed that when they got drunk their own souls would leave their bodies and the spirits of the gods would enter them and have a good time.
Sake today is made from malted rice, steamed rice, sake yeast and water. It's about 15.6% alcohol by volume and is slightly stronger than most wines but milder than a hard liquor. In summer it is usually drunk chilled or at room temperature. It can be drunk from a small cup or from a wooden box called a masu that gives the sake a woody tinge.
In winter it is often heated in a porcelain container. This is called kanzake and comes in various temperatures: hot (atsukan); medium hot (jookan); and lukewarm (nurukan). There is also a form served at body temperature and is called hitohadakan. This dates form the Edo Period, 1600-1868.
You will often see sake drunk in various anime shows, usually from the small cups but from time to time from the wooden box.
There is one form of sake, called Ryori sake, which is a dry, lower grade of sake used for cooking for sauces and for softening meat.