The plot of the video game is very similar to the film. King Neptune's crown has been stolen by Plankton, and SpongeBob and Patrick must retrieve it from where Plankton sold it to: Shell City. A few areas in the game are not seen in the film, such as where SpongeBob and Patrick must escape Gooberland (their dreams) by following the Goofy Goober in the Patty Wagon.
Much of the locations in the game greatly exaggerate the movie's screen time; for example, SpongeBob never had to tour Planktopolis in the movie, but he does so in the game. And later again to the Krusty Krab 2, in the Patty Wagon (requiring several Goober Tokens to get it back as this is in their reality, not their dreams).
The gameplay is similar to that from the previous game, Battle for Bikini Bottom. There are 18 levels in the game that loosely follow the storyline of the movie. Each level will contain it's main component, and with the exception of the 4 boss levels, each level also has side tasks in it. Each main level and side task will give the player a Goofy Goober Token once completed, and the player needs these tokens to learn certain skills and proceed to the game. Although you only need to complete a level's main component to unlock the next level, it is not possible to complete the game only doing the main level's (though you do not need to do all of the side tasks).
- Platforming - Ultimately the main levels of the game, the player must use SpongeBob and/or Patrick to proceed through the levels. Several skills such as combat, careful movement, and most notably the use of SpongeBob/Patrick's movesets are needed to progress. Each of these levels have some side tasks which offer a Goofy Goober Token, and some of the ones which are recurring throughout the levels include:
- Sonic Wave Guitar - The player has to use SpongeBob's Sonic Guitar (his 5th and last move) to guide the wave throughout rings without missing one.
- Spongeball - The player must guide a ball-form SpongeBob through a plattforming area, similar to the Super Monkey Ball series.
- Floating Block Challenge - Patrick must jump from block-to-block to reach the Goofy Goober Token, and each block has different attributes.
- Combat Arena Challenges - SpongeBob, with only few health units throughout the level, must defeat some waves of enemies.
- Driving - Using the Patty Wagon, sometimes the player will need to drive through an area. All of the driving levels require have 3 identical side tasks; a time challenge, a ring challenge, and a "Macho" (or harder) time challenge.
- "Sliding" - Using a small bathtub that acts almost like a sled with its movement, the player must slide through the area. The same side tasks as in the driving sequences.
- Bosses - There are a total of four boss battles in the game, and oddly enough, none of them contain any side tasks.
There is also an update system in the game. As the player progresses to levels, they will learn new moves for SpongeBob and Patrick which are needed to win the game. Additionally, the player will receive points as they go through the levels; once the player gains enough they get an "Upgrade Point" which can improve a skill's effect (or be used to increase the player's Max Health from 3 to up to 6 units). The upgrades are not necessary (but are very helpful) to completing the game.
The game does not use a life system; if the player dies they are reverted to their last checkpoint, the game doesn't count deaths.
The gameplay is similar to that of Employee of the Month. The game consists of 8 chapters. It mainly follows around SpongeBob and Patrick a various number of locations (e.g. the Trench). Unlike the console versions, there is no save feature; instead, players are given a variety of level passwords as they progress through the game.
There are six worlds to progress through, plus many bonus levels.