Got nice reading from wikipedia about glow fuel we use in RC models : http://en.wikipedia.org/wiki/Glow_fuel
Glow fuel is a generic term used to describe a fuel source used by models -- generally the same or similar fuels can be used in model airplanes, helicopters, cars and boats. Glow fuel can be burned by very simple two stroke engines or by more complicated four stroke engines and these engines can provide impressive amounts of power for their very small size.
Other commonly used names are nitro or just model fuel. Note that the nitro name is generally inaccurate, as nitromethane is usually not the primary ingredient, and in fact many glow fuels, especially the so-called "FAI" type, named for the Fédération Aéronautique Internationale, which requires such fuel in some forms of aeromodeling competition, contain no nitromethane at all.
Glow fuel is generally a mixture of methanol, nitromethane and oil.
Methanol is usually the primary ingredient, as it provides the bulk of the fuel and is also needed as a solvent for the other ingredients. It's also needed for the glow plug generally found in model engines to burn via a catalytic reaction to keep the ignition going between strokes.
Nitromethane is generally added to the methanol to increase power and to make the engine easier to tune. Typically glow fuel is about 0-30% nitromethane, with higher percentages of nitromethane generally giving better performance but costing more (as nitromethane is considerably more expensive than methanol.) A given amount of nitromethane contains less energy than the same amount of methanol, but it requires less oxygen to burn (approximately half), so more of it can be put into an engine during each stroke and this leads to a higher power output.
For racing use, the nitromethane content can be increased well above 30% with a corresponding increase in cost, but some methanol is still required as it's needed to allow the glow plug to ignite the fuel in the first place, and as a solvent to allow the lubricants and nitromethane to mix, so the nitromethane content usually doesn't go any higher than 65%.
Nitromethane is often difficult to obtain in many countries, being that it's known as an explosive, so in these countries glow fuel generally has no nitromethane at all. Without at least a small amount of nitromethane, glow engines are harder to tune (get the correct fuel/air mixture) correctly and generally provide less power for a given displacement.
Most model engines require oil to be included with the fuel as a lubricant (as it's not provided by the engine itself) and so model engine fuel is typically 8-22% oil. The most commonly used lubricants are castor oil and synthetic oils, and many glow fuels include a mixture of the two. The oils included in glow fuel generally are not burned by the engine, and are expelled out the exhaust of the engine. This also helps the engine dissipate heat, as the oil emitted is generally hot.
Glow engines generally have to be run slightly rich (with a higher fuel:air ratio than is ideal) to keep the engine cool (as the fuel going out the exhaust also takes heat with it) and so vehicles with glow engines generally get coated with lots of oil (as almost all the oil comes out the exhaust) and some nitromethane and methanol as well (as it's not all burned) requiring some cleaning when one is done using their model.
Glow fuel is not difficult to make, and so many modelers mix their own to save money, but some of the ingredients are flammable and/or explosive and so can be dangerous, especially in large quantities. Most modelers buy their glow fuel premixed from such manufacturers such as Powermaster, Morgan, Byron, Blue Thunder, Wildcat, Tornado and many others.
Another form of model fuel is called diesel fuel, which generally consists of kerosene, ether, oil and some sort of ignition improver, usually amyl nitrate or isopropyl nitrate