According to some psychical researchers it is a biological substance emitted by materialization mediums. If you look at some of the pictures of this ectoplasm coiming out of their mouth it doesn't look like a substance but like cheesecloth. Of course it may only look that way. The problem though if its cheesecloth and their is fraud taking place in many seance rooms. Then their is an accomplish, but how does a piece of cheesecloth form a apparent physical being which is warm blooded, a heart etc. Which many participants of seance room phenomena have experienced. Here is more about ectoplasm here:
A seemingly lifelike substance, solid or vaporous in nature, which allegedly extrudes from the body of a medium and can be transformed into materialized limbs, faces or even entire bodies of spirits. Ectoplasm often appears milky white in color and smells like ozone.
Coined by French physiologist Charles Richet in 1894 to explain the strange third arm, or PSEUDOPOD, emanating from EUSAPIA PALLADINO, ectoplasm comes from the Greek words ektos and plasma, meaning "exteriorized substance." But ectoplasm-like vapors had been observed surrounding D.D. HOME by SzR WIULAM CROOKW. And medium Madame desperance described being covered with luminous spiderwebs which eventually developed into a living organism. Earlier, a 17th-century philosopher named Vaughn described a substance he called "first matter" or "mercury" which seemed to be like ectoplasm. These extrusions often seemed warm to the touch, had weight, produced carbonic acid and seemed to wax and wane from the medium's body. They could also be cold and rubbery or doughlike. Emanations usually came from a body orifice, such as the mouth, ears and nose, but could also pour from the eyes, navel, nipples or vagina. Their structure varied from amorphous clouds to thin rods to a wide membrane resembling a net.
Also check out this chapter from Victor Zammit's book the case for the afterlife. It talks about ectoplasm.