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Source:Food Reference.com

The next time you are in the grocery store and wonder why pure vanilla extract is so expensive, consider the following:
The vanilla bean is the fruit of a tropical American species of orchid. It is of only a few orchids which produce anything edible and there are more than 20,000 orchid varieties.
The plant produces one flower which lasts for only one day. If it is not polinated, it will be another year before it flowers again.
After the flower is pollinated (usually by hand using a wooden 'needle'), it takes about 6 weeks for the bean pod to develop and reach full size (6 to 10 inches), and another 9 months to mature.
The pods are then hand picked, and dipped immediately in boiling water to stop growth. Initially, the vanilla bean has no flavor or aroma. The beans must be cured by heating in the sun during the day and wrapping them to sweat at night, for up to 20 days.
They are then air dried in trays for 4 to 6 months, and during this process the beans ferment and develop their unique aroma and flavor.
The cured pods contain about 2% vanillin (the main flavor component), oleoresin, sugar, aldehydes, alcohols, esters, etc., which all contribute to its unique aroma and flavor. The cured beans are then crushed and the the flavors extracted with with water and alcohol.