A ferrofluid is, quite simply, a fluid with magnetic particles in it. This means that, if the fluid is exposed to a magnetic field, all the magnetic particles will align with the field lines. Specifically, ferrofluid is a colloidal liquid made of particles less than 10 nanometers in diameter, and when it's subjected to a magnetic field, it's these nanoparticles that form regular patterns of peaks and valleys.
The substance invented in 1963 by NASA's Steve Papell in order to transport liquid when there is a lack of (less) gravity. It was designed as liquid rocket fuel that could be drawn toward a pump in a weightless environment by applying a magnetic field
Best of all, you can make it yourself. Learn how to make something like it here. Note: You will have to have a pretty strong magnet and some printer ink. What you will actually have is magnetorheological fluid, which is rather similar. The difference is that ferrofluid has dispersed nanoparticles. Although some ink toners have nanoparticles present, they come in aggregated clusters that are micrometer scale in size (it's a fine distinction).
WATCH: Ferrofluid in Action
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