It is a dark gray muffler with a hole in it.
Role in episode
When the Bikini Bottomites threaten to pop Bubble Buddy, SpongeBob asks if any of them have a special friend. After Mr. Krabs mentions his love for Nickel Buddy, Sheldon looks at Funny Muffler and cries. Larry also mentions his Jerky Pal. This moment does not last long, as they still agree to pop Bubble Buddy.