If you destroy two or more altars in one run, Kali will curse you by shackling a debilitating Ball and Chain to your leg, which will remain with you for the rest of the game or until destroyed.
Functionality
If you let it drag behind you, the ball and chain will slow your movement speed. Attempting to fly using a jetpack with a ball and chain shackled to you will only allow you to hover at the maximum length of the chain, but it's possible to fly if you hold the ball and chain in your arms, this will slow you down horizontally, but vertical speed will remain as usual
The ball can also be thrown at enemies, but it doesn't have much range; it is, after all, tethered to you.
It's possible for the ball and chain to trap you in such a way that you can't escape, so be careful not to let the ball get into places it can't be unhooked from while traversing unusual terrain.
If the ball and chain is thrown into lava, thrown into the abyss, crushed or put into the worm tongue when the worm comes, it will be destroyed leaving you free of its effects.
The ball and chain will break blocks if it's above the height of the player, this was intented to not get trapped by it that easily but can be used to get gems from the walls or destroy the whole City of Gold.
It has been confirmed that the Ball & Chain can be used to destroy the Moai Head in the Ice Caves. This allows the player to carry the held item into subsequent levels, which was otherwise not possible.
Trivia
Spelunky's ball and chain is most likely a reference to Nethack, where a ball and chain can be received by reading a scroll of punishment or potentially by angering your god; it drags along behind you and hits you in the head when going down stairs, but can be picked up and used as a (very heavy) weapon, or thrown to drag you along with it. However, in Nethack there is a plethora of ways to remove the punishment.