There are several different ways in which it is formed:
It is formed as a product of beta-oxidation of odd-chain fatty acids, which occur in meat of ruminant animals.
It is also a product of metabolism of isoleucine and valine.
It is a product of alpha-ketobutyric acid, which in turn is a product of digestion of threonine and methionine.
Metabolic fate
In mammals, propionyl-CoA is converted to (S)-methylmalonyl-CoA by propionyl-CoA carboxylase, a biotin-dependent enzyme also requiring bicarbonate and ATP.
This product is converted to (R)-methylmalonyl-CoA by methylmalonyl-CoA racemase.
(R)-Methylmalonyl-CoA is converted to succinyl-CoA by methylmalonyl-CoA mutase, an enzyme requiring cobalamin to catalyze the carbon-carbon bond migration.
A defect in methylmalonyl-CoA mutase enzyme results in methylmalonic aciduria, a dangerous disorder that causes a lowering of blood pH.
Metabolism in plants and insects
In plants and insects propionyl-CoA is metabolized to acetate in a very different way, similar to beta oxidation.
Not all details of this pathway have been worked out, but it appears to involve formation of acrylyl-CoA, then 3-hydroxypropionyl-CoA.
This is metabolized with loss of carbon 1 of 3-hydroxypropionyl-CoA as carbon dioxide, while carbon 3 becomes carbon 1 of acetate.
References
Halarnkar P, Blomquist G (1989). "Comparative aspects of propionate metabolism". Comp. Biochem. Physiol., B92 (2): 227-31. PMID 2647392.