Would that resemble the sponge filter 3rd down the page at the following addy? :)

http://www.franksaquarium.com/sponge_filters.htm

Doing a Google image search will give you dozens of filters that run on the same premise. Water is drawn through the sponge, good bacteria settles on the many surfaces and really toxic ammonia is broken down into the merely toxic nitrates. Other good bacteria breal that down into the somewhat less toxic nitrite.

For a while it was popular to put a sponge mat over the entire undergravel filter. Lots of surface area! For a while they are terrifically efficient. Imagine they are harder to clean with a gravel vacuum than a regular u.g. filter. I wonder if the mat and the u.g. filter should be pulled up and rinsed every couple of months.

You still need frequent water changes for your tank or in time the accumulated nitrites will prevent the hemogloben from being able to carry all of the oxygen it can (among other problems.) Fry will stunt. Eventually after a period, all will suffocate. :(

When that sponge is cleaned out, just squeeze it enough to get rid of the really dirty stuff. It shouldn't leave a cloud when put back in the tank, but should not be "new" in color.

See http://honors.montana.edu/~weif/firsttank/sponge.phtml
The rest of the site may prove useful too.

If you visit sites which picture large guppy fishrooms, you will notice that a number of breeders, raising guppies for competition, use and recommend sponge filters.

I use the model alluded to above quite a bit. The more expensive ones do have more surface area and should be even more effective.

Water shouldn't thunder through them. Surface areas need contact time with the ammonia to be effective. A string of bubbles should be about right. :)

Don't use Sponge Bob as a filter. One of the few things - thankfully - which probably hasn't come out in a Sponge Bob motif. ;)