Gunpowder is an item dropped by creepers. It can only be used to make TNT.
Gunpowder can currently only be obtained from Creepers. Once killed they may 1-2 Gunpowder. A Creeper has to be killed for it to drop the Gunpowder; if the Creeper explodes then nothing will be dropped. This makes Gunpowder hard to obtain. In 0.9.0 you may find them in chests from a dungeon.