This dust is just about what you would think dust is; small grains of silicate material with perhaps a coating of ice. The two main effects of interstellar dust are to decrease the intensity of starlight and to make those stars appear redder.    This reddening of the star results in an increase in the color index of the star; an effect called color excess.  If you have ever overestimated the distance to a stoplight on a foggy night, you can appreciate how interstellar dust may make a star appear to be farther away than it really is. And those of us who have seen bright red sunsets know that particles in between us and the light source can cause objects in the sky to appear red. The Coal Sack is a very good example of a dark nebula. So we see that there is a great variety of material that hides exists between the stars.  A hundred years ago these fuzzy objects were known as nebulae.  In the classical definition, a nebula is any object that is not a star.  But that definition has evolved throughout the years.
Interstellar Dust
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Carpe Caelum
Carpe Caelum Stellar Astronomy
Carpe Caelum Stellar Astronomy