He is the same form as Squidward, but wears a bathrobe and cap, while having a white glow from the powder.
Role in episode
SpongeBob and Patrick destroy Squidward's wax sculpture, which after, they think they killed Squidward himself. After Squidward gets out of the shower, they mistake him for a ghost. Squidward enslaves them and they later want to put him to rest. When they try to do so, Squidward admits it is a lie.
SpongeBob and Patrick do not believe him and then try to put him in a bubble. When Squidward is in the bubble, he floats above the ocean and SpongeBob and Patrick wave "goodbye" to him.