The hat is blue and has an orange fan on top. It also has two wires running to batteries, in order to power it.
Role in episode
After Mr. Krabs finds out that the Soda drinking hat is worth a lot of money, he buys a bunch of hats to trade SpongeBob for the Soda drinking hat. One of those hats is the Air Conditioner hat. SpongeBob declines the hat since, according to him, it was "a little dangerous."