Earl was one of Cosmo and Wanda's past godchildren, from the 17th Century. A notable aspect about him is that he is the inventor of the sandwich. He seems to be quite wealthy, living in a very large castle and with access to a lot of food. His name also implies royalty.
In the episode, he seemed to want to find a convenient way to hold several different foods for consumption. While he was on the edge pf inventing the sandwich, Timmy walks in, making Earl accidentally spill milk on the table. Bread then falls on it, soaking up the spill. Earl decides to use bread as a sponge, rather than in sandwiches, looking for other spills to soak up. He calls it a Spill Soaker-Upper until Timmy says "It's a Sponge, dude." He mistakenly calls it the Sponge-dude, thinking that is the full name.
Later in the episode, he is seen using different kinds of bread for different spills. Timmy comes back and tells him that he's supposed to be inventing the sandwich, calling him a bozo in the process. But Earl ends up calling the invention the "Sandwich Bozo."
Later, in the episode's climax, Erg, along with Timmy, the Erg and Benjamin Franklin come together to stop Megan Bacon from destroying Fairy World. Earl catches all of Megan's bacon blasts between slices of bread, making sandwiches and stopping them from getting hit.