He is light gray and has a light green leaf on his head.
Smelly originates when Squidward falls off his bike and gets stuck in the cement, falls into sewage, and gets a leaf on his head. This makes him look like an animal, hence why SpongeBob and Patrick have no idea that he is indeed Squidward.
SpongeBob and Patrick "rescue" him and Patrick take him in to live with him. Eventually, the police capture Smelly and put him in the Bikini Bottom Zoo. They call him "Unknown Species" only to be rescued again by SpongeBob and Patrick. At the end of the episode, Smelly is freed to roam with his own kind. When he gets there, his identity is revealed and the episode ends. It is revealed that Smelly is Squidward. Apparently, he is enemies with Gary and Gary is, apparently, the only one who knows who he is.