Here is a diagram of how to connect your ButterFly to the Serial Port on your PC to use the on-board Programs and Boot-Loader.

Between the Computer and the Butterfly, the Transmit and Receive lines are Criss-Crossed and the two grounds must be tied together

Computer Tx ===> ButterFly Rx
Computer Rx ===> ButterFly Tx
Computer Gnd ==> ButterFly Gnd

Note that Ground is depicted here in green.
I stuck to the colour-scheme depicted in the Atmel Documentation.
Typically I would have shown it as Black.

Here is the connection Diagram of the UART Port:

Here is the Schematic of the UART level conversion for the ButterFly.

ButterFly does NOT use level conversion chip like MAX232,

The level conversion on the way out is powered by the high voltage coming in.

This has been know to cause problems with some of the new USB-to-Serial Converters. The other major problem being that AVR Prog will only recognize COM Ports 1 to 4 and many of these USB converters create their virtual serial ports above COM4, so you have to manually reconfigure your Windoze.