Lime is made from heating crushed limestone in a kiln. This gets rid of the carbon dioxide.
In rendering, two types of lime can be used. One is hydrated lime, the other is hydraulic lime.
Hydrated Lime is used in sand sand and cement and can be used on all backgrounds. Hydrated lime stops cracks in the mix and sticks better to the background.
Hydraulic Lime sets like cement when mixed with some water but sets a lot slower than cement. Hydraulic lime is used on old structures that were built with lime mortar.