An espionage balloon is a balloon used for spying.
Espionage balloons were a development of the observation balloons used even before the World War I behind the front line. Unlike observation balloons, espionage balloons were neither manned nor moored to the ground; they were designed to fly deep into hostile territories, where they would record intelligence data and transmit them back to the home base. As such, espionage balloons could only be operated successfully when the weather forecast and the wind direction were favorable. They were more economical (and indeed dispensable, often falling victim to air defense) than manned reconnaissance aircraft, as they did not put flying personnel into harm's way. They were usually hot air balloons.
Moreover, during the Cold War, espionage balloons launched by the "Free world" also had a secondary psychological warfare capability, carrying propaganda pamphlets and consumer goods (which were supposedly not freely available inside Communist states) that would be released or otherwise delivered onto enemy territories.
On December 24, 2011, and following the death of the North Korean leader Kim Jong-il, members of the Korean Peninsula International Peace Organization launched four large balloons into North Korea from the South. These carried propaganda leaflets and also pairs of socks which could be used as trade items on the North Korean black market, notably for food. The group said that such launches will continue "until the day of reunification". The incident sparked outrage from the North Korean government, who threatened to retaliate against these and any future launches. Although the group have been discouraged by Seoul from further launches thus provoking the North Korean government, they have not actively been stopped from doing so at the time of writing.
The advent of spy satellites, coupled with the end of the Cold War, have rendered espionage balloons obsolete.