This material was invented by NASA. It is a fluid with magnetic properties and reacts to a magnetic force. Ferrofluids are made of treated nano particles of magnetic material in a carrier liquid. The nano particles are treated so that they do not clump together. These particles do not retain the magnetism when a magnetic field is applied to it however they do react to the magnetic force.
Ferrofluids have found use in a lot of applications like Radar evading paint, speakers, hard drives, youtube videos ;) , Magneride suspension systems, cancer detection etc.
Well now I have a theory on what the black smoke on the island is all about. Ferrogas.
Great pictures at Projekt Cyan..hope you dont mind..