It's explained in Perfect Memento in Strict Sense (the official guide to Touhou from games 6-9) that humans can become youkai after years of studying magic and learning the spells that enable one to be able to not need sleep and to not be able to eat. It turns the magician into a youkai and grants pseudo-immortality, which means that they can live forever (or at least for centuries) but are not truly immortal (like Kaguya and Mokou are).
@Knuxsu2015 Youkai is a general term for many different types of demons and monsters from Japanese mythology. It is not explicitly stated what type of youkai Yukari is. All that is known is that she's ancient and powerful enough to be practically a god. My two theories are that she is 1) an eldritch abomination (think Cthulhu or Yog-Sothoth) that projects the form of a woman we see or that 2) she's a youkai magician (like Alice or Patchy). She could be in the same clan that Maribel Hearn is in.
