During the preparation of the "eleventy-seventh" anniversary of the Krusty Krab, SpongeBob tells Gary that he has been entrusted by Mr. Krabs to keep the Krabby Patty secret formula safe. But while talking to Patrick, who has been hired for free as a guard, SpongeBob struggled hard to remember the location of the secret formula but only to fail to remember. Noticing his current sadness, SpongeBob worries as he states to Patrick that bringing sad makes him unable to remember anything.
Upon hearing the dilemma of the sponge, Plankton shows up and offers a partnership in order to remember the formula's location. SpongeBob hesitates at first, thinking that Plankton might be using him to steal the formula but was convinced by Plankton's "honest face".
The two headed to the Chum Bucket and SpongeBob was strapped to Plankton's memory machine, in which SpongeBob relives his memories through the help of his friends recreated in his mind.
Unknown to SpongeBob, Plankton deploys his robots to SpongeBob memories to search the formula's location. Unfortunately for Plankton, the remote for the robots was broken accidentally, forcing him to go to the sponge's mind and search the formula's location himself while guiding SpongeBob while reliving events in the sponge's life.
SpongeBob, finally remembering the formula's location, wakes up and declares that the formula is inside a safe. Plankton suddenly laughs and reveals his entire plan to SpongeBob that he only used him to find the formula. Plankton, then, turns the Chum Bucket into a massive robot that is headed to the Krusty Krab and ejects SpongeBob out of the giant robot. SpongeBob desperately chases the giant robot and goes inside to destroy its core.
After destroying the giant robot, SpongeBob rejoices but was approached by Mr. Krabs and was asked about what happened. SpongeBob answers that he lost the formula but was able to remember it where he hid it. The two headed to the Krusty Krab's safe where, much to the sponge's surprise, as the safe was empty. SpongeBob cries in complete sorrow but was able to suddenly find a paper in his pocket which is the secret formula. Upon giving the paper to Mr. Krabs, the crab recognizes that the paper was not the secret formula, but his lottery ticket instead, realizing that he handed the wrong paper all along, much to SpongeBob's surprise. Mr. Krabs was able to find the real formula on his back pocket and laughs it off, to which SpongeBob mocks him after learning that all the things are done for nothing. Plankton appears near to them while angrily whine about his constant loss and decides to give up and walk away.
A scenario exclusive to the PSP version shows that before waking up and unintentionally destroy's Plankton's machine, SpongeBob remembers that the formula is somewhere the Krusty Krab but was unsure if he is correct. Patrick suggested that he should remember all of his happy memories at the Krusty Krab, much to SpongeBob's disdain. SpongeBob then encounters Mr. Krabs giving the formula to the robot SpongeBob, whom he mistook for the real one. As the robot runs away, Spongebob chases the imposter while surviving hordes of robots, including mini-bosses, while jumping into mysterious teleporting boxes. After catching up with robot imposter, SpongeBob rejoices, only to find the imposter suddenly changed into one of Plankton's rogue hammer robots and knocks out the sponge.
The game features ten levels (twelve on the PSP version) that are reminiscent of various events on the television series.
Each level features platforming with hordes of enemies that can be destroyed through attacks. SpongeBob has three types of attacks that are obtained as the game progress, although attacks that are later unlocked cannot be used when replaying earlier levels. SpongeBob can also absorb water and spray it on various objects such as water-powered machines, fire and sponge platforms. All attacks in the DS version are already available from the beginning.
Spatula Slam - SpongeBob morphs his head into a giant spatula (hammer if in buffed form) and slams onto the ground. The PSP version grants twice the damage when performing this attack in mid-air.
Spin Slap - SpongeBon morphs his head into a giant rotating ship's wheel (mechanical fans with long blades if in buffed form) to hit multiple enemies at once on a short range but has a weaker damage compared to the spatula. Can also be used for turning on rotating switches and gliding for a half second.
Cannon Shot - SpongeBob morphs into a cannon to shoot water balloons at enemies and activates switches from a longer distance. The ammo is limited but can be replenished by collecting another pack of water balloons. The damage is doubled when in buffed mode.
Power-ups are also present in the game. When collected, the power-ups provides temporary enhancements to SpongeBob for only a short period of time.
Dumbbell - SpongeBob becomes buffed and gains muscular arms while wearing workout clothes. This power-up allows SpongeBob to deal twice the damage to enemies and break stone tikis. Unlike the other power-ups, the buff power-up doesn't have a timer and will only disappear once SpongeBob gets hit once. This is absent as a collectible power-up in the DS version where the buff power-up is activated by filling the gauge in the lower screen.
Hammer - SpongeBob morphs into a hammer and summons Patrick to hold him and rapidly slam into the ground, instantly dealing greater damage to enemies.
Karate Glove - SpongeBob morphs into a karate glove and summons Sandy to spin around continuously. Can destroy giant flowers that eat SpongeBob.
Music Note - Squidward suddenly appears and rapidly shoots two scattered water balloons.
Mr. Krabs - This power-up is exclusive to the Nintendo DS version.
Happy tokens are scattered throughout levels that can be collected in order to improve the furniture and memorabilia in SpongeBob's home. The coins can also be used to buy costumes and health upgrades. In the DS version, tokens are used to fill the gauge for SpongeBob to become buffed.
A variant of the happy tokens, exclusive to the DS version, is the silver tokens, which are worth more than the ordinary happy tokens. Also, present in the DS version are memory fragments, which allows players to enter secret areas, which will lead to bonus decorations in SpongeBob's house if all were collected.
There are also Patricks hidden around each level. Although it's purpose has no effect on the gameplay and are merely Easter eggs for the players to find. However, finding all of them will make players gain a Xbox achievement for the Xbox 360 version.
The console version, which is the Wii and Xbox 360, was developed by Heavy Iron Studios, while the PlayStation Portable version was developed by Barking Lizards Technologies. The PSP version was made to be similar to its console counterparts while having differences due to the handheld's limited hardware.
The HUD is closer to the edge screen on the PSP version, due to the size of the screen.
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.
In-game hub world dialogues are only voiced and subtitled as opposed to the console versions, which has characters animated to match the dialogues.
Also, the PSP version lacks the letterbox screen during dialogues.
With the exception of pre-rendered cutscenes, small cutscenes, such as stage and enemy introductions, can not be skipped.
SpongeBob instantly moves to the direction where the analog stick is pushed towards to instead of turning around first.
Using the spatula move in mid-air damages twice on normal enemies.
When buffed, one can see holes on the top of SpongeBob's eye.
Also, when buffed, "Twelfth Street Rag" doesn't play.
There are fewer costumes and no health upgrades that can be bought in the wardrobe. Only one costume can be seen and the player needs to use the Direction Pad to view other costumes. The ones that are not bought are shown on silhouette forms.
Costumes are plain retextures of characters as opposed to actual costumes in the console versions.
There are two exclusive levels, Bikini Bottom and Krusty Krab.
However, Bikini Bottom was originally for the console version but was scrapped due to unknown reasons.
Multiplayer in the PSP version is a set of party games that can be played through Ad-hoc as opposed to the console version's cooperative gameplay.
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 contain 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 the 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 canceled, 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."