Smashed potatoes that look like Squidward are a food item that appear in the episode "There's a Sponge in My Soup."
They are mushy white smashed potatoes served on a light blue Krusty Krab plate. They have some very small chunks of potato skins visible. As their name states, they are clumped in a way that resembles Squidward's face. The smashed potatoes are very messy, and they leave globs all over the plate and Mr. Krabs' claw and arm.
In the rough storyboard by Kelly Armstrong, the potatoes were much more clumpy with a bigger "nose" on Squidward and no globs coming off of the plate.
It is implied that the Krusty Krab serves normal smashed potatoes as a food item on the menu, and this particular serving just happened to end up looking like Squidward.
Role in episode
Mr. Krabs uses the smashed potatoes as an ingredient for the Krabby Soup. The potatoes are still caked to a customer's plate when Mr. Krabs brings them out, so he has to use a knife to slide them into SpongeBob's soup pot. They cause the soup to bubble after being added.
When SpongeBob asks Mr. Krabs if he got them from the trash, Mr. Krabs denies this, stating that it would be illegal to resell food from the garbage. He claims that he "intercepted" them before they fell into the trash instead. A few minutes later, the three hippies, Moon Gills, Sunshine, and Crystal Dave, eat the smashed potatoes from inside the soup, making it just broth.