So...I turned the form first and then I go to hollowing it out. I drilled down through the center of the jug to start the hollowing process. About two thirds of the way to the bottom of the jug I could feel the drill bit hit a hole...there was no resistance. As I hollow down to the point where the bit went through easy, sure enough there started a hole in the wood. I slowly hollowed further. More hole appeared. I got a flash light and observed something in the hole.

Finally this was revealed(pic). Keep in mind that until I opened the hole up there was nothing but wood around it...no little hole to the outside or anything. Like a geode. As I opened up the hole of course I was hoping some old coot had stuck a bag full of gold double eagles in the tree hole for safe keeping but of course not. No such luck. More than likely its one of those "alien eggs" and one of those little Alien things is going to get implanted in my lungs. :-))

But...any body have any idea what this might be? I figure it has to be some kind of fungi or something similar.

So my quandary is leave it for a golly gee wiz thing or cut it out and finish the inside of the jug as per usual.