The Caterpillar Bubble is a large caterpillar-shaped bubble character who debuts in the episode "Bubblestand" and is seen again in "Spot Returns."
It is a long, clear bubble that is shaped into a caterpillar that SpongeBob blows. It has bubble eyes, a mouth, and two antennae.
In "Bubblestand," SpongeBob was showing Patrick bubbles from his technique, he used his wand to create this caterpillar bubble. The caterpillar bubble then starts being popping, one segment at a time before it completely disappears.