Valentine's Day is a holiday that is celebrated in Bikini Bottom on February 14. It is celebrated in the episode of the same name and the books The World's Greatest Valentine and SpongeBob's Secret Valentine.
For the citizens, it appears that it depends on who the citizen is.
SpongeBob gives most of his friends generic hearts and other gifts. With his best friends, he gives them special things like a chocolate heart made of chocolate syrup for Sandy and a giant chocolate heart balloon for Patrick.
Patrick initially plans to give SpongeBob a rock in the shape of a heart. However, he thinks SpongeBob is trapped inside, so he destroys it in an attempt to "free" him.
Sandy gives SpongeBob an acorn in the shape of a heart with an arrow in it.
Other citizens spend their day with their friends and loved ones at the carnival.