It's called Balsa-Foam, and is similar to the floral flower foam you stick flowers in, except this is very dense and carveable. I purchased this ages ago, so I don't remember for sure, but I think it came in different sizes and thicknesses.
I've used it several times over the years to make little props for the dolls. You carve it like you would a piece of wood.You can use things to make impressions in it like crumpled foil or lumpy rocks to make rock like textures. I used my excato knife, toothpicks, cuticle tool and anything else that was laying in front of me to make this nifty little headstone for my ghosties. One word of caution, once you make an impression in it it's there...so I suggest you practice first on a small piece to get the feel of it.
Here it is painted. I covered it first in sobo glue to help seal it as it does absorb water. Solvent based paints will seal it good, but I didn't have any. Thick paint will fill in the lines so experiment. I have also used resin after I've carved my design, as this will harden and seal the whole piece. Here,..... the, "Oh so theatrical Miss Pennythistle", has donned her Victorian Mourning veil, and carries her wilted flowers, to weep over the tiny phantomly grave of the unknown "Our Darling" Oh Miss "P" you are such a mournful site...we weep for you!!!
I've used the balsa foam for the rock base on this earlier ghostie, "Tiny Veronica Carey, who was mistaken for a blueberry.... She was eaten for lunch... swallowed down with fruit punch, by a nearsighted Ogre named Harry!
The Balsa foam can be found at hobbystores like the ones that carry model railroads and airplanes. I've not ever seen it at the regular craft stores.
Hope this gives you something new to explore if you didn't already now about it.
Happy hauntings, Gail,... and the sorrowful Miss "P"!