Once, the magical ooze was the enormous magical energy contained into the Tower Heart ,but when Florian Greenheart tried to absorb the energy inside the Tower Heart, it exploded, destroying the upper levels of the Dark Tower and generating the Magical ooze, which corrupted the land over time, generating the Wasteland, and transformed people into Magic Zombies. Gnarl mentions that it could do many other things like turning into stone or becoming frogs.
The magical Ooze is magical energy that wasn't asorbed when the Tower Heart exploded, and formed scattered pools of a slimy blue, glowing ooze that has enourmous magical power, but the magic inside it was lost overtime, making it useless for the Overlord.
Don't sweep the minions inside it, unless they are blues, or they'll transform into Mutated Minions and will turn against you. Blues will make the ooze go away as long they are in proximity of it, but the ooze will regenerate back. For the Overlord, it drains health until death.
It had a very powerful influence in the wasteland, since it mutated the Slugs from Golden Hills, changed plants, it can mutate Red, Green and Brown Minions if they walk in it, and it turned the bedrock into a black unstable rock that can freely fly around.
When you sweep multiple minions inside the ooze like lets say 4 minions only 3 of them will mutate the other will disappear. This also counts for 10 minions only 3 will mutate and the rest will despawn.
If a minion is inside the ooze and start acting like its about to mutate than it will always mutate. Even if you save it with blues.