The Goofy Goober Guitar is a peanut-colored and shaped guitar made to resemble the Goofy Goober mascot. On the end of the neck, there are the initials "GG," standing for Goofy Goober. It also has a small switch on it, most likely for amplifying purposes.
A red guitar is an unlockable attack that is granted to SpongeBob by Mindy in the "Welcome to Planktopolis" level, in which the former must aim the guitar at the eyes of the Plankton statues. Upgrading the attack will transition the instrument into a Goofy Goober Guitar. It is also used to rid the bucket helmet off King Neptune's head in the final boss level, "Turn the Tables on Plankton."
There is also a minigame in which SpongeBob must aim his guitar through Sonic Wave Guitar Rings and hit a target at the end, all of which take place in earlier levels of the game. Failing to get the guitar through the rings, not aiming on time, or hitting an obstacle will result in the player losing the game.
"Lost and Found"
The guitar is on a shelf in the Lost and Found, along with a lot of other items from the first movie.