<electronics, humour> A substance trapped inside integrated circuit packages that enables them to function (also called "blue smoke"; this is similar to the archaic "phlogiston" hypothesis about combustion). Its existence is demonstrated by what happens when a chip burns up - the magic smoke gets let out, so it doesn't work any more.
Usenetter Jay Maynard tells the following story:
"Once, while hacking on a dedicated Zilog Z80 system, I was testing code by blowing EPROMs and plugging them in the system then seeing what happened. One time, I plugged one in backward. I only discovered that *after* I realised that Intel didn't put power-on lights under the quartz windows on the tops of their EPROMs - the die was glowing white-hot. Amazingly, the EPROM worked fine after I erased it, filled it full of zeros, then erased it again. For all I know, it's still in service. Of course, this is because the magic smoke didn't get let out."
Compare the original phrasing of Murphy's Law.