That is an oak gall. Here is an excerpt from the PNW Handbook to which I have provided a link below:
"The California gallfly causes the largest and most conspicuous of the galls on oak, achieving a diameter of 1 to 4 inches. It is a twig gall that is often called an oak apple. It starts out green and in time becomes red on the sunny side. Later in the season, the gall turns brown or greyish just before the adult wasps chew their way out. The gall does no apparent damage to the tree and is removed easily without harming the twig. During its development, the gall may host up to a dozen larvae."