Grease an 8x8 baking dish with butter and set aside.
In the bowl of a double broiler or a small heat-proof bowl over a pot of simmering water, add the peanut butter, butter, and butterscotch chips. Over low heat, melt the mixture until it is smooth and all of the ingredients are completely incorporated. Remove from the heat and stir in the vanilla extract and salt. Make sure the peanut butter mixture is not too hot, or it will melt the marshmallows. The mixture should be lukewarm, if it is too hot, let it cool for 5-10 minutes before continuing.
In a large mixing bowl, add the mini marshmallows and carefully pour the melted peanut butter mixture over the top. Using a spatula, fold the marshmallows into the peanut butter mixture until they are completely coated. Transfer the marshmallows to the greased baking dish and, using a spatula, smooth them out.
Refrigerate the squares until they are fully set, about 2-3 hours before cutting and serving.
Notes
You can use rainbow colored marshmallows if you prefer, to make these squares truly retro.
Make sure to use fresh marshmallows, as stale marshmallows are dry and will clump easily.
Gently press the marshmallows into the baking dish to avoid crushing them. The squares will turn out dense if the marshmallows are crushed or packed too tightly.
Store peanut butter marshmallow squares in the refrigerator for up to 2 weeks in an airtight container.
The marshmallow squares can be frozen in an airtight container or ziplock bag for 2-3 months. If they are frozen longer than that, the texture of the marshmallow can turn gritty.
To cleanly cut the bars, run a sharp knife under hot water for a few seconds before cutting and wipe the blade clean between each cut.