Yes you're right it does look like a fungus, can you believe that is actually a type of living coral called Montipora. The piece that you are looking at there is about 4 or 5 feet across, this was also in Palau, shot in one of the shallow lagoons there. You can see a couple more types of coral below, and a rose colored sea anemone with a clownfish. God's creation is so beautiful beneath the sea, I have many hundreds of photos from this trip, I can't wait to go diving again...