How to safely store a defective (bulging) lithium-ion battery
I had this happen, and I had to store it till I had time to drop by a designated ewaste centre which specifically accepted lithium ion batteries. (This is important. Throwing potentially inflammable materials in regular trash is bad. Only you can stop fires)
There's likely no need to panic if it's a week or two.
You want to store it for as short a time as possible. For most part, unless you stab it, an unused bloated battery ought to be reasonably safe. Practically you want to leave it somewhere cool and dry - so a fridge isn't the best place. The fridge trick is used for dying batteries in some cases, not dead ones.
I'd suggest taping over the connectors to prevent accidental shorting and just leaving it somewhere non inflammable.
Freezing doesn't sound bad until you realise you need to take it out there's a sudden change in temperature (potentially bad) condensation (see moisture).
It's also worth considering this had happened over a course of weeks or months before it got noticeable - there was some pressure on the screen and I'd assumed it was an air bubble the screen protector, and I'd noticed the bloating entirely by accident, so short of baking (advertantly or otherwise), burning or stabbing your battery, or taking a few months to do it, you probably don't need to massively baby the battery. Just don't charge it (and for once self discharge is fine). A battery not in use is slightly less likely to spontaneously catch fire.
There're a few suggestions I've seen online - like putting the battery in salty water (which sounds like a terrible idea, especially since lithium reacts violently with water, and is a potential source of bloating anyway) or trying to discharge the battery (energy flow could mean heat could mean fire). The MSDS backs this up, suggesting that the electrolyte reacts with water to form HF (which is nasty) and the anode with h2. And many other scary things.
So leave it alone, keep an eye on it, and avoid viking funerals and you should be fine.
This is a fire hazard! You need to isolate the battery to reduce the risk of property damage.
RC LiPo battery fire (source)
The battery is internally pressurized with oxygen due to a cell failure. All Li-ion batteries can generate a small amount of free oxygen internally during normal operation, so most batteries are encased in a rigid shell to prevent expansion. However, in the event of failure, a cell can generate enough oxygen to expand dramatically. (You probably remember from chemistry class that oxygen is one part of the fire triangle, so guess what happens if the cell vents and there's a spark or open flame nearby...)
Puffing occurs when the battery has suffered metallic lithium plating due to abuse or failure, causing the oxygen to not recombine as intended in the cell chemistry. The metallic lithium reacts with the oxygen to form lithium oxide, but lithium oxide has less oxygen than the normal lithium ion chemistry, causing free oxygen to accumulate inside the battery. This extra oxygen is what causes the battery to expand. Needless to say, this can be a serious fire hazard. More information can be found in this Traxxas forum thread and in this blog post by Matthew Barnson.
While this condition is most often encountered by RC enthusiasts who push LiPo batteries to their limits, any pouch LiPo (or even prismatic Li-ion) battery, including the kind used in mobile devices, can suffer this type of failure. If the cell is allowed to vent, a fire could result.
The best thing to do is to isolate the battery in a fireproof container. RC enthusiasts often use dedicated fireproof charging bags to prevent fires from causing property damage in the event of battery failure. If you don't have such a container, leaving the battery outside in a metal barrel or similar can reduce the risk of property damage in the event the battery does ignite.
While freezing the battery will reduce the expansion (as most gases expand and shrink almost linearly with temperature), it will not reduce the actual amount of free oxygen inside, nor will it fix the underlying problem of metallic lithium plating. In fact, since recharging a Li-ion battery below freezing can cause plating (see Battery University article), storing the battery in very low temperatures may not be a good idea.
When I had a bulging Li Ion laptop battery, I stuck it in my barbecue grill outside until I had a chance to take it to hazardous waste disposal.