SpongeBob has been entrusted by Mr. Krabs to keep the Krabby Patty formula safe. But in all the excitement, SpongeBob loses the formula. He then relies on the help of the most unlikely companion, Plankton. With the help of his friends, SpongeBob must use Plankton's memory machine to retrace the happiest moments of his life (because according to SpongeBob, he is unable to remember anything when he is sad) to find the Krabby Patty formula in time for the Krusty Krab's "eleventy-seventh" anniversary. Little does SpongeBob know, however, that Plankton wants the formula for himself and has inserted robots into SpongeBob's memories to extract the precise location of the formula. But after breaking the controller, Plankton has no choice but to go inside SpongeBob's memories instead. SpongeBob travels through his memories, fighting robots and robot bosses that look like Patrick and Squidward. He then remembers the formula is in the Krusty Krab safe. Plankton finds this out however and turns the entire Chum Bucket into one giant Plankton-bot. After destroying it, SpongeBob tells Mr. Krabs the formula is in the safe. But then finds out it was in his back pocket the whole time.
Players can reminisce through fan’s favorite SpongeBob moments as the game draws upon ‘The 10 Happiest Moments of SpongeBob’s Life’. They consist of ten different levels. They are called Jellyfishing With Patrick, Meeting Sandy Cheeks, Pretending To Be Tough With Patrick, Becoming A Fry Cook, Santa Santa Santa!!!, Meeting Mermaid Man And Barnacle Boy, Squidward's First Yummy Krabby Patty, 24 Hours Of Fun At The Krusty Krab With Squidward, Kara-tay With Sandy, and the final boss level is Hey, That's Not Your Formula Plankton! Also included are story elements from the animated television series. In multiplayer mode, players can play as SpongeBob or with a friend playing as Plankton throughout the entire game on both the Wii and Xbox 360 platforms. The power-ups in the game can help SpongeBob during one of his happiest moments, here are the power-ups. These are based on SpongeBob's skill's: the spatula slam, the spin slap and the cannon shot. The hammer makes Patrick appear and use SpongeBob as a mallet. The Gloves with halves of his face on them makes Sandy appear and use SpongeBob as a pair of Karate Gloves and spins around until the time limit goes down to 0. Clarinet makes Squidward appear and use SpongeBob as a Clarinet to shoot music notes at robots, which turns SpongeBob into a stronger version of himself. In multiplayer mode, players can play as SpongeBob or with a friend playing as Plankton throughout the entire game on both the Wii and Xbox 360 platforms. Each system's cover art is different, much like The Simpsons Game. (To participate in multiplayer on the Xbox 360 you must have a Xbox Live connection, and on Wii, you need Wii MotionPlus.)
Jump into a Shower (or in the house, the bathtub) to invest SpongeBob with water. In addition, when you fill yourself with water in levels, you can spray the water out on platforms that look like sponges. Spray the platforms to make them bigger. There is also a Downtown Bikini Bottom stage and Krusty Krab stage included only in the DS and PSP versions, and a Mr. Krabs power up exclusive to the DS version.
The console version, which is the Wii and Xbox 360, was developed by Heavy Iron Studios, while the PlayStation Portable (a.k.a. PSP) version was developed by Barking Lizards Technologies. Barking Lizards Technologies tried to make the game similar to the console versions while having great differences with the console versions.
The HUD is closer to the edge screen on the PSP version, due to the size of the screen.
The buttons shown are, obviously, PSP controls.
The cutscenes are recorded instead of in-game.
Subtitles shown on cutscenes are on the very bottom of the screen and the text has a very small font while overlapped on a black transparent border instead of a blue rectangle.
Dialogues using the in-game graphics are only subtitled instead of the characters moving their mouths and having cinematic style.
When buffed, one can see holes on the top of SpongeBob's eye.
Also, when buffed, Twelfth Street Rag doesn't play.
There are less costumes that can be bought and there are no health upgrades that can be bought in the wardrobe, only outside the wardrobe. Only one costume can be seen, the player needs to use the Direction Pad to view other costumes while the ones that are not bought are shown on silhouette forms.
Costumes are plain retextures of characters.
There are 2 exclusive levels, Bikini Bottom and Krusty Krab. However, Bikini Bottom was originally for the console version but was scrapped due to unknown reasons.
Multiplayer is very different.
The graphics are scaled down due to the hardware capabilities of the PSP.
This game includes a multiplayer mode in which the second player can play as Plankton. In the game, they can stun, zap, or grab enemies. When they stun the enemies, they will be temporarily stunned for a short period of time. This is an advantage to player one. When they zap an enemy, they will be damaged. When they grab enemies, they can shake the enemies left and right or they can slam the enemies down. This stuns them for a limited period of time.
The multiplayer option in the PSP version is a set of party games that can be played by one or two players instead of a hidden cooperative gameplay. Press the triangle button to view a tutorial video depending on what game is selected.
Check Please - A hockey game with the patty as the hockey puck. The entire concept was based on the episode "Krabs à la Mode"
Collide & Conch-er - Players ride with their vehicles and capture jellyfishes scattered on the arena. If a jellyfish is captured, players must return to their starting points to score. There are also item boxes that contains weapons that can be used to attack enemies.
The game has received generally mixed reviews, with the Official Xbox magazine giving it a score of 4 out of 10. 
Some of the game's stages resemble the ones from Battle For Bikini Bottom (Jellyfish Fields, Kelp Forest, Mermalair and Rock Bottom). The game also includes Tikis and Robots just like Battle For Bikini Bottom.
The music used in this game are recycled from SpongeBob episodes and two SpongeBob games (Battle For Bikini Bottom and SpongeBob Movie).
In the game, defeating the PatBot takes place at night while the episode it’s based on takes place in the day, although the DS version of it takes place in day.
The boxes around the level that you can teleport to when you have complete the level resembles the box from "Idiot Box." They also are similar to the boxes in Battle for Bikini Bottom and The SpongeBob Movie Game.
This and SuperSponge are the only video games where Ernest Borgnine actually does the voice Mermaid Man. In all other video games appearances of Mermaid Man, he voiced by Joe Whyte.
Prawn, the mini-boss in the Mermalair from Battle for Bikini Bottom appears in the Truth or Square Mermalair frozen in tartar sauce exactly as he appears when defeated in Battle for Bikini Bottom (except bigger, and SpongeBob said he was Man Ray by mistake and realizes he was Prawn, but calls him Mr. Shrimp).
The Wii version can be played with either the Wii Remote, Pro Controller or the GameCube controller.
Each platform cover has a different SpongeBob face.
Squidbot, the cut boss from Battle for Bikini Bottom, appears as a boss in Squidward's First Yummy Krabby Patty.
On the Nintendo DS version, in SpongeBob's pineapple, there is a 1% chance that Squidward will appear dressed up as Santa. He will start to say different quotes that he would say when acting like Santa.
In other SpongeBob games, jellyfish are common enemies, but the jellyfish in this game only appear in the first level, but as platforms.
SpongeBob's tongue slider appears again in this game.
This may be a prequel to Truth or Square (Episode).
This game is developed by Heavy Iron Studios, which is the reason this game uses many elements from Battle for Bikini Bottom, another SpongeBob game, such as music, enemies, and objects like tikis. Three bosses (one which was scrapped from the home console version of Battle for Bikini Bottom) make an appearance in Truth or Square. It also has similarities to the SpongeBob SquarePants: The Movie game.
Prawn makes a small appearance in the background of the 6th level. He is frozen in Tartar Sauce like ManRay was in Mermaid Man and Barnacle Boy III. However, if you walk up to him, SpongeBob says, "Ahhhh! ManRay!"
A PlayStation 3 version of the game was planned, but then canceled for unknown reasons. 
The level, "That's Not Your Formula, Plankton!," may have been originally named "Becoming a co-casher," because the official site called this level "Becoming a co-casher."
The last level for the DS Game is labeled "???" for some unknown reason. And an exclusive level called "Krusty Krab Recall" is on DS edition.
In the DS edition, Demento Bot appears as Santa, Santa, Santa boss and Tenderizer Bot become Kara-Tay! with Sandy boss.
In the tutorial videos of "Check Please" and "Collide & Conch-er" in the PSP multiplayer party games, the floor has a darker lighting than the actual party game.
Possibly an early beta version of this game later changed to coincide with the release of the TV movie "Truth or Square," "Happiness Squared" was to be the third SpongeBob video game produced by Heavy Iron Studios, the others being Battle for Bikini Bottom and The SpongeBob SquarePants Movie video game, respectively. No information on this project has been given except an early demo video released on YouTube in January of 2010 (video link: https://www.youtube.com/watch?v=a5EtoPyw3rg), with similar gameplay to the previous two games and the later Truth or Square. The end of the video states this game was to be released in fall of 2009, but the game that made it into stores by Heavy Iron was SpongeBob's Truth or Square, further concluding that this was the first version of the game.
The trailer also said the game was supposed to be on the PS2, but that version was cancelled, and possibly replaced with the Xbox 360 version.
This is the last SpongeBob game for the PSP, as well as the last one to be distributed on a Universal Media Disc.
In SpongeBob's pineapple, there is a photo book that can be used to select levels. The pages shown have a picture of SpongeBob, Squidward and Mr. Krabs inside the Krusty Krab from Graveyard Shift, and a screenshot of SpongeBob and Sandy from "Tea at the Treedome."