Ferrofluids are made up of tiny magnetic fragments of iron suspended in oil (often kerosene) with a surfactant to prevent clumping (usually oleic acid). The fluid is relatively easy to make at home yet extremely expensive to buy on-line. How does $165 a liter sound? Pretty bad, right? Read on to learn how to make ferrofluids on the cheap.
There are many commercial applications for ferrofluids--speakers and hard drives being the most common. The oily fluid prevents debris from entering hard drives when a small amount is placed between the magnets and shaft. In the case of speakers ferrofluids remove heat from the voice coils and help dampen the cone movement. (From Popular Science)
http://www.youtube.com/watch?v=me5Zzm2TXh4&feature=youtube_gdata
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