UFFI stands for Urea Formaldehyde Foam Insulation, a type of expanding foam, ideal for insulating hard-to-reach places such as wall cavities. Instead of tearing the wall apart to add insulation, a technician only has to make a few holes and inject the foam into the wall, allowing the foam to expand into place. Once expanded to fill the entire area, the foam cures, forming an excellent thermal insulation. 
UFFI was developed in Europe in the 1950s and used successfully for many years before it was introduced to North America in the 1970s, a decade of oil crises. Improvements to home insulation made sense with the high cost of energy. From 1977 to 1980, many homes in North America were insulated with UFFI.
What's the Concern?
Formaldehyde is used extensively in manufacturing. Products such as carpets, manufactured wood (cabinets and furniture) and materials in new cars, release formaldehyde gas when they are new. Car exhaust, tobacco smoke and cleaning products also number among the other indoor and outdoor sources of formaldehyde gas.
At low levels, formaldehyde is harmless. At moderate levels it is an irritant. Many people thought that UFFI was making them sick from the formaldehyde off-gassing. It's true that UFFI will off-gas for a day or two after installation. It's also true that improperly installed UFFI could off-gas for longer. It is unlikely that the UFFI was making anybody sick. This is still a contentious issue.
Not Used Today
UFFI was banned in Canada in 1980, and in the United States in 1982. The ban in the US was lifted in 1983, but remains in Canada. Banned or not, UFFI's stigma put it out of use.
Do Homes Today Have Formaldehyde?
Most homes do contain low levels of formaldehyde but UFFI is not the source. Any formaldehyde from UFFI installed in 1980 would have long since off-gassed. It probably off-gassed almost entirely within a couple of days of installation. Homes with UFFI do not show higher formaldehyde levels than homes without UFFI.
What Does It Look Like?
UFFI is white to yellow and looks like foam. Since it was mostly used for injecting insulation into wall cavities, it is difficult to identify without opening walls. More often, UFFI can be identified by the injection holes that remain on the exterior of the house.
Inspection for, and identification of, UFFI is not part of a home inspection. If you think your home has UFFI, and you would like to know for sure, contact a UFFI specialist. You can also test air samples for formaldehyde if you are concerned. It is unlikely that you will get a level higher than 0.1 parts per million, a safe level. Typical indoor levels are about 0.03 ppm. If you do get higher levels, the source will likely be something other than UFFI.
Foam in a Can is Not UFFI
The foam in a can used for sealing gaps around the home is NOT UFFI. It contains no formaldehyde. It is a much stiffer foam than UFFI. An experienced inspector will be able to tell the difference.
Poly- Iso-Cyanurate
Another expanding foam insulation used today for insulating hard-to-reach places is called cyanurate. It is more commonly known by a popular trade name Icynene. It is not UFFI and contains no formaldehyde. It is an excellent insulation that has many applications for residential homes but should not be confused with UFFI.
The fuss over UFFI seems to have no legitimate claim, though the stigma still remains. UFFI poses no health problem today and likely never posed one to begin with.
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