Snowballs are round white balls of snow. You can find them in the Architecture section of inventory. Each snowball occupies a 1x1 block space and has no collision.
How to Obtain
Snowballs can only be obtained by crafting them from snow, or by trading for them in a market world. They do not generate naturally.
How to Use
Like all arctic blocks and items, snowballs can only be placed in arctic worlds. Tragically, you cannot actually throw them at people. Nor can you successfully stack them up to make a believable snowman. However you can put them at the bottom of a couple links of chain for that snowy disco-ball look. Or if you build some giant gingerbread people, snowballs make great buttons.
A quick look through the game files reveals some hope that maybe one day snowballs will be able to make snowmen. One of the .png files shows images of a snowman face, the perfect size to superimpose on a snowball. As of January 2016, this snowman face remains tucked away, and is not yet implemented into the game.