Sponge

Sponge is a block notable in Classic and Indev for being able to erase water within a 5×5×5 area.

In Minecraft versions starting with Alpha it is a purely decorative block only attainable via Creative Mode or inventory editing.

History
The sponge is a type of building block added in the update to 0.0.19a client update on June 20th, 2009. The sponge was a temporary fix to stop water from flooding until finite water was implemented. It was also used as yellow for pixel art before yellow wool was introduced.

Since Beta 1.8, the sponge block is available for use in Creative Mode, but it doesn't function. Sponge is unobtainable within survival mode unless inventory hacks or mods are used.

Properties
Sponges do not need light to survive, and do not decay (sponges used to decay in the implementation of the 0.0.19a update, but this was changed within 50 minutes of the release). Sponges also use the same sounds as grass.

As a building aid
A sponge can be placed around an area underground clearing the area of water. This can greatly help construction of underwater bases, homes, etc. After the player constructed the structure, the sponges can be easily removed.

As an anti-griefing measure
A sponge can be hidden in walls, floors, etc. as a defense against griefers. This can confuse and slow down griefers when attempting to flood an underground development, leaving more time for them to be caught and stopped.

In small rooms, this measure, when implemented in every corner of said space, can stop that room flooding altogether.

As a redstone tool
Note: This use has apparently been removed as of snapshot 12w07a, making Minecraft 1.1 the last official version with which this is usable.

A sponge can be used as a redstone object for updating blocks. If you place a sponge next to a block that needs to be updated, then remove the sponge, all blocks within a 5x5x5 range will be updated. This can be very useful for redstone builds using the BUD (Block Update Detector) switch, especially since it also updates areas whenever it is pushed by a piston.

Trivia

 * The code used to make sponges absorb water still partially exists in the current version, but the code that actually removes the water blocks (and prevents water from flowing back into the dry zone) no longer exists, meaning that the sponge currently does nothing.