It is a bacteria-infected Krabby Patty that is very posionous. It is covered with light green mold and hairs and contains tainted buns, meat, and cheese. Consumption of it will result in hallucination of a giant hamster named Cuddle Eat Hugs.
Role in episode
Squidward and SpongeBob are cleaning up the Krusty Krab. Squidward finds a moldy Krabby Patty and throws it away, but SpongeBob prevents him because it's still a Krabby Patty nonetheless and should never be wasted. SpongeBob then takes a bite of the patty and becomes sick to his stomach. He then runs to the back of the restaurant and the Aged Patty causes him to hallucinate a giant hamster named Cuddle Eat Hugs.
The next day, SpongeBob awakens to find Cuddle Eat Hugs gone. SpongeBob figures a Krabby Patty would make him feel better, so he takes another bite of the old patty, sickening him once more. At that moment, Cuddle Eat Hugs returns and he and SpongeBob reunite with a hug. Cuddle later suggests that SpongeBob feed others the Aged Patty, so he does just that by cutting it into pieces and selling it at a stand in the Krusty Krab for free.
This is the second rotten Krabby Patty that SpongeBob has eaten in the series, the first being the rotten version of Patty in "To Love a Patty."