The films it produces are mostly in Hindi (although versions with English subtitles are common) and are generally lively, energetic musicals. The audiences for these films are huge and people come from all over the world to act and work in Bollywood.
Bollywood films often have their own sense of internal logic and can be as surreal as any musical produced by American or European studios. The music is generally pre-recorded, with actors miming the words. Of late though the new trend shows the actor singing for himself too, like Aamir Khan in Ghulam. They are often engaging spectacles that tell timeless stories of love and turmoil.
During the period that Bollywood was not known outside of India and the various Indian communities a lot of licences were probably used without permission.
Currently due to increased visibility and increasingly large audiences some Bollywood films can have fairly large budgets, allowing them to use famous film sets such as Hatfield House in the United Kingdom.