The Sludge-O-Matic™ is a machine operating in Dr. Fred Edison's basement generating bio-waste. Dr. Fred thought that every serious mad scientist's laboratory extracted waste.
Purple Tentacle drank some waste, causing him to be mutated and grow arms. Dr. Fred attempted to send Bernard, Hoagie, and Laverne to yesterday and turn it off before Purple drank from it.
According to the future Purple Tentacle, it was he who designed the Sludge-O-Matic™ in the future and sent the plans to the past so that Dr. Fred would construct it and cause him to be mutated in the present.