Ferrofluid is a beautiful mess of iron particles suspended in oil, but the beauty comes at a price of $US165 a litre. Let's take the DIY route to this, shall we?
Before you run off to grab the magnetic ink developer, ferric chloride or recycled cassette tapes needed to make it, let's review what ferrofluid is and how it works:
Basically there are plenty of uses for the liquid, in engineering, electronics, optics, and most importantly, art. Due to the oil portion of ferrofluid following the iron particles, you can control the substance with some strong magnets and make it dance around like in the video.
Spiffy, purty and that was just scientific enough to pass any damages you cause off as a "learning experience". Check out PopSci for the details on just how to make a DIY version of the stuff while I ignore any bets on how much of a mess I'll make while trying each approach. [PopSci]