Does anyone know what this is?

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Looks like sponge. Is it...spongy? If so, its harmless. Or even better yet, beneficial.
 
Yep, sponge. The holes in the base give it away. Beneficial.

It's forming those tendrils because it's seeking out more rock. That's how some of them encrust. It's pretty cool. Some sponges are pretty strong. If nothing else, it'll re-enforce your live rock where it grows.
 
Definately a sponge. We have one that has taken over a rock in the front of our 55 gal and it seems to be the thing we get most questions about when people view our tank. It is just preference on whether or not you want to keep it there.
 
Thanks so much for the information, We had it growing in our 55 gallon, and in July we upgraded to a 100 gallon and when we did it just took off and started growning like crazy. I just added a 180 gallon to my collection and am so very excited to get it going. I need lights (for a good price), anyone have any??
 
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