Olestra is a non-digestible plastic, made by adding eight fatty acid molecules to the sugar molecule sucrose. The fatty acids block access to the sugar, so enzymes can't break it down.
The result is a molecule that behaves like a fat, but cannot be digested by humans or their intestinal bacteria.
The manufacturing process creates many different molecules, some with fewer than eight fatty acids, and with many different fatty acid chains other than those pictured above.
Olestra is currently only approved for use in savory snacks, such as potato chips.
Because Olestra is not digested, it behaves much like mineral oil. The laxative properties are widely discussed, and appear on the label. Like other indigestible lipids, Olestra can dissolve fat soluble vitamins and carotenoids, making them unavailable.
The molecules in Olestra have been modified since it was first marketed, to avoid some of the more unpopular side effects, but some remain. Adding carotenoids and fat-soluble vitamins to the product has also been done, but this does not eliminate all of the problems with nutrient absorption.
Most users do not encounter problems. It is unclear at this time whether affected individuals accommodate over time, like they do with sorbitol and some other sugar alcohols which produce similar problems.