It is black lemonade that is made from Squidward's ink.
Role in episode
SpongeBob and Patrick continuously scare Squidward after discovering that he produces the ink when scared, and sell it with their lemonade.
Squidward does not want to give anymore ink to Patrick, so the latter resorts to scaring the former, including revealing his inner organs and letting a spider named Mildred enter Squidward's house. Squidward sprays a lot of ink out of his nose and Patrick gives the black lemonade to the stand.
Patrick's final plan is to make a haunted area in front of Squidward's house, causing the now-paranoid Squidward to spray a lot of ink. Eventually, he runs out of the haunted zone and finds out that SpongeBob and Patrick were using his ink to sell lemonade the whole time.
Unfortunately, Squidward is unable to make more lemonade, so he chooses to have a customer scare him in order to get lemonade. Don the Whale does, and Squidward sprays ink like crazy all over the customers. Eventually the customers find out the "source" and puke in Squidward's house.
SpongeBob and Patrick also moved out of the lemonade business to sell cookies. As Squidward eats one of them, SpongeBob and Patrick say they used spider eggs as chips, resulting in Squidward screaming out spiders and spraying ink as the episode ends.
It is possible to make black lemonade in real life by coloring it black using activated charcoal, a tasteless compound known to have various health benefits.