Funds earned by Pink Floyd's album "The Dark Side of the Moon" went towards funding this movie. The band were such fans of the show, they would halt recording sessions just to watch Monty Python's Flying Circus (1969).
The famous depiction of galloping horses by using coconut shells (a traditional radio-show sound effect) came about from the purely practical reason that the production simply could not afford real horses.
During one of the first screenings of this movie in front of a live audience, co-writer and co-director Terry Jones noticed that when music was played during the jokes, there was a marked reduction of laughter from the audience. He went back and edited the music out whenever a punchline was delivered. At subsequent screenings, he noticed a dramatic increase in the audiences' positive reactions to the jokes. From that point on, whenever he directed, he remembered to stop the music for the funny parts.
In the Killer Rabbit scene, a real white rabbit was used. He was dyed with what was assumed to be a washable red coloring liquid in the shots after the battle. When filming wrapped, the rabbit's owner was dismayed to learn the dye could not be rinsed off. Terry Gilliam described in an audio commentary that the owner of the rabbit was present and shooting was abruptly halted while the cast desperately attempted to clean the rabbit before the owner found out... an unsuccessful attempt. He also stated that he thought that had they been more experienced in filmmaking, the crew just would have purchased a rabbit instead. Otherwise, the rabbit was unharmed. The rabbit-bite effects were done via special puppetry by Gilliam and special effects technician John Horton.