From Homestar Runner Wiki
The Delicious "Bag" is some kind of Old-Timey treat that comes in a bag with a smiley face on it. It apparently is still manufactured today, as it could be given out as part of 3 Times Halloween Funjob (that or a few very old and rancid Delicious Bags survived past the Old-Timey era). It is a leading contender to Fluffy Puff, and in Mr. Shmallow, the company attempts to put down the Delicious Bag. Sickly Sam also thought it would make a fine sock for the colder of his two feet, until The Sneak tore it apart.