The Magma Ball is a Rare item gained at Magma Rock. It is described as "a glowing, red ball of volcanic rock." Near the end of the dungeon, around the time you gain the Blaze Psynergy, there is a room with lava and platforms and it "erupts", spewing out many flaming rocks. The rock on the top left that the camera specifically focuses on contains the Magma Ball. When the player reaches it from the top left and interacts with it, the Magma Ball is taken from it, and the rock loses its heat source and freezes.
There are two specific uses of the Magma Ball late in The Lost Age, both required to allow the story to progress. In the town of Loho, interact with the cannon in the center of town and use the Magma Ball on it, and the cannon will fire a powerful explosive that pulverizes the wall it is facing toward. The dwarves immediately and automatically give the cannon to you by installing it onto your ship, and you can get several Forgeable Items as well as the Jupiter Djinni Lull. Then at the entrance to the Northern Reaches, the ice wall that blocks your way can be removed in a cutscene when you have both the Magma Ball and Cannon, thus letting you into the final portion of the game.
Afterwards it can be sold for some quick cash, as it has served its use. Note that this counts as an Artifact, meaning that if you sell it too early by accident, it can easily be bought back from any town's Item Shop for 800 coins.