It isn't vodka mixed with milk — it's an actual spirit distilled entirely from fermented dairy, condensed drop by drop from simmering sour yogurt in a homemade still.
Fermented milk or yogurt is heated in a covered pot; the alcohol vapor rises, cools against a lid or coil, and drips out as a clear, mild spirit. It's traditionally served warm in a small bowl, and Arkhangai, with its abundance of milk and long airag-making tradition, is one of the regions most associated with distilling it well.
Suutei Tsai (Salted Milk Tea)
Khorkhog / Boodog (Stone-Cooked Whole Sheep or Goat)