It's vitreous humor, from insubordiknit.com:
Ever wish you had eyes on the back of your head? Well now you can have them all over your head, bwahahaha...or your neck...or wherever you choose to don your knitted eyeball item.
Five colorways of handpainted merino wool with scads of handdyed tussah silk noils, soysilk, organic cotton and ingeo then corespun the yarn thick and thin, poofy and tight, so that it would resemble a mass of muscley eye innards. Spun in, nice and tight, are 13-15 hand felted eyeballs Note -- these are NOT plied in or tied in! They are spun in, part of the actual yarn.
They seem to have a podcast too, and promise more background on this yarn in the 4th episode.