A Coral is a block that can spawn on Mud, especially when fluids like water, mineral water or bog water are nearby. Most riverbeds are made of Mud.
Large areas of coral are forming reefs under the ocean, and corals can likewise be found near Mineral Water lakes in the Stalactite layer.
Corals can also be harvested from Pets or obtained as loot from:
Currently corals are not used for any crafting-recipes and such remain to be decorative blocks that can be used for building by being placed (like Rockzillas altar).