Clay

Clay is a block that was introduced in version 1.0.11 (Seecret Friday Update 6) on July 25th 2010. It uses a light-blue/gray recolor of the Sand texture.

Obtaining
Clay can be found on the surface in groups of varying number by a body of Water usually surrounded by Sand. It is usually exposed, but is sometimes found under sand or water. It is quite rare. Players can gather clay by using any type of tool, but Shovels are the optimal choice. Destroying clay blocks will yield 4 balls of Clay each, which can be crafted back into a clay block.

Uses
Clay balls can be baked to make Bricks, which can then be made into Brick blocks.

Trivia

 * Clay seems to have become much more common after the Halloween Update.