They can be reeled out with a fishing rod, which will decrease their attack from 4 1/2 to 4 for larger size, 3 1/2 for medium size, and 1 for the smallest size.
Sponges spawn in ocean biomes, never above land, always in water. They will attack the player, but if looked at they will run away as long as the crosshair is on them, they will also not attack the player if he/she wears a pumpkin. They do not split like other slime mobs, once one is killed it will not spawn smaller Sponges.
They will occasionally spawn dyed any primary colors (All dyes obtainable without mixing dyes) such as cactus green, brown, blue, black, white and the like, they will not spawn in colors such as orange, light blue, gray, pink etc. Because these are mixed colors.
When killed it drops 1 piece of sponge if small, 2-3 pieces if medium, and 4-6 if large, and 1-3 fish if small, 4-6 if medium and 6-9 if large (If you're looking for a scientific answer to why the Sponge drop fish, the sponge eats fish, it has mutated to the point of being capable of movement and catching [and eating] fish.)
It also attacks other mobs it encounters, though only those who come within a smaller radius than it will attack a player within.