Take a good look at the square sponge that you are supplied. If you turn this inside out it will then look like a round red sponge ball. That is the secret!
Start by holding the normal red ball in one hand and the red (square) ball (turned inside out) in your other hand. Give the spectator the normal red sponge ball and explain you are going to give a simple eye test.
Close their hand and then with your gimmicked ball close your hand and as you do you push the square ball (popping it out) and quickly close you hand.
Ask the spectator to tell you what shapes you are both holding. They of course will say circles but after a little hocus pocus you show your hand and open it up to reveal a square.