The Caterpillar Bubble is a large caterpillar-shaped bubble character who is first seen in the episode "Bubblestand" and is seen again in "Spot Returns."
It is a long, clear bubble that is shaped into a caterpillar which SpongeBob blows. It has bubble eyes, a mouth, and two antennae.
In "Bubblestand," when SpongeBob shows Patrick bubbles from his technique, he uses his wand to create this caterpillar bubble. The caterpillar bubble then starts popping, one segment at a time before it completely disappears.
In "Spot Returns," SpongeBob blows this bubble before noticing Plankton painting a sign next to the Chum Bucket.