Coalbed methane development is growing fast. However, the occurrence state of coalbed methane is still in query, for which a study was conducted in this paper. Source rock of mudstone has a small amount of organic material, which can only absorb quite small amount of methane recoverable without economic value. However, coal has a large amount of organic material, which can absorb a large amount of methane recoverable with economic value. Organic material of coal rock is polarized weak on molecules, is likely to adsorb methane molecules with weak polarization. The strongly polarized minerals in coal rock are likely to adsorb water molecules with strong polarization. Coal rock consists of matrix block and fractures, which can be called fractured mudstone. The methane in free gas generated in matrix migrated to fractures and was lost away, and finally only adsorption gas was stored and kept. It needs to produce water and decrease formation pressure to develop coalbed methane. Pressure drawdown can degas the formation water, and desorb adsorption methane, and generate free gas. Then free gas migrates to fractures and will be produced to surface. There is critical production pressure for coalbed methane development. The process of coalbed methane production does not have diffusion phenomena.