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The bubbles that form are carbon dioxide gas. A chemical reaction occurs between the vinegar (an acid) and the baking soda (a base).
For all of you bakers out there, this is also what makes cakes and quick breads (the no yeast kind) get nice and fluffy.
Pour 4 Tbsp vinegar in a container with an opening small enough to fit a balloon around (small vinegar bottle or juice bottles work well).
Pour 2 Tbsp baking soda in a balloon that isn't blown up (make a siphon out of cone of paper)
Without tipping the baking soda in, put the balloon over the top of the container. Use your hand or a rubber band to hold the seal.
Jiggle the balloon so the baking soda is dumped in.
The balloon will blow itself up! (this is the carbon dioxide gas)