The fill of paintballs is a combination of water, a substance called Sorbitol (a color dye), and varying amounts of wax. Sorbitol is a food sweetener used in candy and chewing gum for example. It is non toxic, water soluble, and breaks down very quickly. The dyes themselves are actually commercial food coloring dyes, such as the ones you might find on a nutritional label of your favorite food (although the concentration is rather high in paintballs). Different amounts of wax are added to some brands in order to thicken the fill. Wax also makes the paint fills more difficult to wipe. Paintball fills used to be iodine-based however those days have ended.
The shells of paintballs are made of the same basic gelatin compound as found in Jell-O. Different paintball manufacturers use different recipes but really it's all based off the same thing. It, too, is a heavily water-absorbant compound, and that is why paintballs swell up (they absorb the water around them). Both the shells and the fill within are both environmentally safe and completely edible, however they do not taste very good at all (as I'm sure you all know, one way or another).
The Encapsulating Process:
The technical name for the encapsulating process is softgel encapsulation, and involves two circular rotars which are covered by the early form of the paintball shell. Carved all throughout the ends of the rotars are hemi-spheres where layers of the paintball shells lie. What happens is the rotars rotate toward each other and the paintball fill is poured into the hemi-spheres, and then when the two opposite sides of one complete sphere come together their fills are sealed within the newly-completed sphere, and it falls out of the rotars. When they fall out they are allowed to dry because at this point they are very large and very soft; as they dry they shrink down to useable sizes. Paintballs that are not round enough or are otherwise undesireable are recycled back into their components and used to create more.
The first paintball manufacurer was a medical encapsulating corporation called RP Sherer (or RPS for short). Nowadays RPS is the largest manufacturer of paintballs in the world, by far. The softgen encapsulating machines are relatively simlar to the machines used to encapsule pills. The production of paintballs itself is far from being a perfect process; paintballs are not perfectly round and they all have at least one seam on their visable shell, and they are larger at the seam and smaller at the poles because of this.
Paintballs will slowly loose their round shape depending on how old they are and that is dependant on the quality of the paint within the shell as well as the composition of the shell itself. Sometimes the de-rounding process is accellerated by the weight of other paintballs in a container adding weight to those on bottom. The encapsulating process is not a very perfect science at this point, so there are occasinoally bad batches. Even then some inconsistencies occur from ball to ball, and even so-called better paint brands tend to be more consistent but even the best paint can have bad batches every once in a while.
Never freeze your paintballs. First, it's illegal at all organized games. Second, it's bad for them. It does not make them last longer, countrary to popular opinion. Optimal paintball storage is 60ºF in a dry environment with minimal temperature variations. You should never expose your paintballs to high temperatures or high humidity conditions as doing so will quickly expand the shell and cause it to be chopped as it is fired. Even brief exposure to hot temperatures and humidity can swell paint enough to do some damage to them. Keep your balls sealed and in shade whenever possible.