"That is butter."
Translation:Das ist Butter.
Ok, to apply my other comment to your question: If you want to show someone butter, you can only say "Das ist Butter". "Die ist Butter" is only possible in theory. Assuming that we were talking about something else that can be butter in some ways, let's say two cups of cream and one of them was beaten to much, I could say: Die Sahne hier ist schön fest (pointing to the first), aber die ist (schon) Butter (pointing to the second, that turned into butter). But this is really an artificial example, so I would not accept it "Die ist Butter" in this lesson, even if it's theoretically possible.
Das/Dies are the demonstrative pronouns that you use to "point to new things". If a person or object is unknown to the listener at the beginning of the phrase, you use one of those two neutral pronouns, even if its biological or grammatical gender is male or female.
- Das ist Herr Müller.
- Das ist meine Freundin.
- Das ist eine Kartoffel.
If the object is known to the listener, you switch to the actual grammatical gender:
- Das ist Marie, die ist meine Nachbarin (n.b. "die" is a bit colloquial, correctly you'd use "sie").
- Welche Tasche möchtest Du? - Diese hier, die ist schön. (Diese because it was already asked for a bag, so it's not new anymore in this sense...)