It is a peanut plant kept on SpongeBob's bathroom's windowsill that is stored in a red flower pot. It contains green dirt and peanuts and green leaves that grow on distorted vines.
Role in the episode
SpongeBob wants to make an ice cream sundae in honor of it being Sunday. However, he is all out of ice cream and finds bananas and cheeries to be boring, so he resorts to using bizarre non-dessert items for the ingredients: ketchup, onions, and his peanut plant, giving him rancid breath and causing everyone in town to turn away from him.
In episodes prior to "Something Smells," there was no peanut plant seen on the windowsill whenever SpongeBob's bathroom would be shown.