They are pale green and dark green worms. They are not often seen but if they are, they'll eat something. They seem to be lead by one leading nematode which calls out things like "hungry," "still hungry," or "thirsty" and leads its followers to foods and drinks. They mostly eat wood and coral and drink pineapple juice.
They consume the Krusty Krab and thus put Mr. Krabs' business into jeopardy, even leading the restaurant to be condemned. SpongeBob tells them to leave so he can get to work, but they ignore this command and then proceed to eat his pants. However, they are then lured out by SpongeBob once he starts playing the tune to "The Best Day Ever," using his nose as a flute. They fall asleep after SpongeBob becomes tired from playing the song.
SpongeBob SquarePants is the second Nicktoon to mention nematodes; the first time was Doug ("Doug Bags a Neematoad"). During a camping trip, Roger Klotz tells Doug about the creature and encourages him to catch it in a manner similar to a snipe hunt.
In "Home Sweet Pineapple," the nematodes copy one nematode (e.g. one nematode says "thirsty," then other nematodes says "thirsty" as well).