Clay

Clay is a block that can be found below water.

Natural generation
Clay is commonly found at the bottoms of rivers and lakes in shallow, crystal-shaped patches, disregarding adjacency to other types of blocks. It can also be found commonly in swamps.

Clay generates inside mason houses in plains, savanna, and desert villages.

From block loot
If broken with a tool enchanted with silk touch, it drops itself instead.

From villager gifts
If a player has the Hero of the Village status effect, a mason villager might throw that player a clay block as a gift.

Breaking
Clay blocks can be mined with anything, but shovels are quickest. Destroying a clay block yields 4 clay balls. If broken with a tool enchanted with silk touch, it drops itself instead. Destroying a clay block with a tool enchanted with fortune does not increase the amount of clay dropped.

Note block
Clay can be placed under note blocks to produce flute sounds.

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Trivia

 * In real life, clay can actually be reddish-brown, not just gray, and can be often found under the surface and away from sand. This color is reflected in the appearance of terracotta, bricks, and flower pots.
 * Because clay blocks always drop exactly 4 clay balls, mining the block with a Fortune-enchanted shovel will provide no extra benefit.