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 hacks.

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

As of 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
Sponge is not affected by gravity, unlike sand and gravel, so it will not fall if a block is removed from beneath it. 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).

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 vertex of said space, can stop that room flooding altogether.

As a redstone tool
Note: This trick has apparently been removed as of 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 that 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 does nothing.
 * In Beta, removing a sponge causes all blocks within its 5*5*5 area to update. This also happens when it is pushed with a piston. This is most likely related to the above point-the sponge is looking for water to block or unblock.