Sponge?

It's a dead coral skeleton and the fuzzy stuff is probably algae or bacteria that could be taking advantage of the nitrate left behind from dead tissue.
 
Like mentioned above it's probably just a coral skeleton of some sort, but there is a coral that sometimes hitchhikes it's way into our tanks on live rock that looks similar to the picture above only it's still very much alive. The name escapes me right now, but if I remember it or find some information regarding this coral I'll be sure to post it.
 
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