Ask Mr. Smarty Plants

Nan Hampton, in a previous Mr. Smarty Plants question writes ... the swellings that you see on the live oaks are caused by various insects depositing their eggs in the plant. (They can also be caused by fungi, bacteria, nematodes and mites). The tree reacts by forming tissue around the eggs, and the insect's larvae develop inside the gall and feed on the gall tissue. The commonest cause of galls (the mealy oak gall) in live oaks in cities is a small wasp, Disholcaspis cinerosa. This tiny wasp has a two-stage life cycle and each stage produces a different type of gall. The wasps that emerge early in the spring from large spherical galls found on branches of the live oaks are all asexual females that lay eggs without mating with a male. Their eggs are deposited in leaf buds and their galls develop on the leaves. The adults that emerge from these leaf galls are both males and females. After mating, these females lay the eggs that form the galls that enclose the asexual females.
Some trees seem to be more susceptible than others to infestation. There are trees that seem never to have galls, and the ones that do get galls may have a heavy infestation one year and a light one the next year. Even those that are heavily infested seem to suffer little, if any, harm from the infestation.
You can read a lot more about the mealy oak gall in "The Mealy Oak Gall on Ornamental Live Oak in Texas" and about other gall-makers in "Gall-Making Insects and Mites" from Texas Agricultural Extension Service, Texas A&M University System.