Final answer:
Lanolin, also known as wool grease, is a natural substance derived from sheep's wool, utilized in some brake fluid formulations for its lubricating and protective properties.
Step-by-step explanation:
The substance derived from sheep and goats that is used in brake fluid is lanolin. Lanolin, also known as wool grease, is a natural substance found in the wool of sheep that has lubricating properties. It is often refined and used in various industrial applications, including as a component in some brake fluid formulations due to its ability to resist water and protect metal parts from corrosion.