Video game is an item you get in the caves. At the Beginning of when you go to find Ernie, there is a hidden wall where a worm is. He will say he is working on a game and will give you the game.
The only use for the item is in a house in the Forest Where you have to insert it into a TV and you can play the game. You have to control a character so the ball doesn’t fall onto the ground. If you get 999 score, you can get the Stubborn Achievement.
A gameplay
The original image from the game data