In an episode called "SB-129" (first season) Squidward accidentally gets frozen for 2000 years, finds a time machine, and gets transported to a place known only as "nowhere."

In the process of finding himself in "nowhere," the time machine malfunctions. "Nowhere" actually becomes somewhere—

 Squidward actually died when the time machine went haywire and that the "nowhere" was Purgatory, the waiting room of the afterlife.