A magnetic fluid is a liquid that has special properties when subjected to a magnetic field. It is created by mixing magnetite particles in oil. If the particles are just the right size, the fluid is nonmagnetic when left alone, but becomes magnetic in an electrical or magnetic field. The result is a stable liquid that responds to magnetic attraction, changing its shape and viscosity depending upon the strength of the field.

The stuff is extremely useful in applications such as speaker dampers and the rotary seals in disk drives, as well as electronically-controlled dampers such as those found in high-end automobiles and anti-earthquake systems.

The fancy name for this liquid is magnetorheological (MR) fluid. It is usually referred to in consumer products (especially loudspeaker ads) as ferrofluid.