The full name of this unfortunate plushie is actually "The Discarded Magical Blue Grundo Plushie of Prosperity". For the longest time, he didnt actually do anything, but now sometimes when you go to see him, you might have a little bit of good luck in the form of an item or some Neopoints.
During the Void Within plot, the plushie was a victim of the Grey Curse, and looked more like this:

...
o_O
An in-universe graphic novel exists where the plushie gains sentience. However, this novel is likely fictional so it remains unknown if he actually is sentient. In it, he is able to move about, and made friends with Buttons and Stitches.