Coral

Added in the 1.0.5 patch.

Coral grows in the oceans at the ends of the world and in any water at least 5 tiles deep within 250 tiles of the edges of the map. It can be picked up by either by hitting it with a Hammer or by mining out the block of Sand underneath it.

It can be placed as a decoration, just like Books can. Once set, it can have one of many appearances (again, like Books) and is sometimes more than one block wide, so bear that in mind if you're trying to place other things next to it.

In addition, it is an ingredient for the Gills Potion.