Transmission electron microscopy (TEM) observations of graphite tubules (buckytubes) and their derivatives have revealed not only the previously reported buckytube geometries but also additional shapes of the buckytube derivatives. Detailed cross-sectional TEM images reveal the cylindrical cross section of buckytubes and the growth pattern of buckytubes as well as their derivatives. These observations of frozen growth stages of buckytubes and derivatives suggest a helical growth mechanism analogous to that of crystal growth via screw dislocations. The helicacy of buckytubes is analyzed by electron diffraction whereas the anisotropy of electronic structure is revealed by momentum transfer resolved electron energy loss spectrometry. Based on the TEM observations, it is proposed that buckytubes act as precursors to closed-shell fullerene (buckyball) formation and the possible steps in buckyball formation are outlined. In arc evaporation experiments in which residue rods (containing various amounts of buckytubes) were used as the starting anode for fullerene production, the amount of buckytubes in the rod was correlated with fullerene yield.