Chum balls look like regular chum rolled into a meatball form.
Role in episode
The cave dwellers and Plankton serve the chum balls to the customers that go into the Chum Caverns to buy food. The only fish who are seen ordering chum balls are Billy and three other fish (besides SpongeBob). The fish claim that it is disgusting, as it is with most of Plankton's food, but they still eat it because of the beautiful scenery of the Chum Caverns.