The Sea Monkey is the main antagonist of the Season 3 episode Steve the Fearless Pilot. It was created by Malloy flushing it down the toilet where it went into the waters contaminated by Woody's radioactive waste barrels. The Sea Monkey eats people and destroys anything in its' sights.
The Novelty Bullshit ad encouraging kids to buy this monster that could kill them (for $1.25)
Ethel then tried to get "Captain Steve" to fight it, and so he did but only because Ethel's life was in danger, otherwise he would have chickened out and ran away.