The Nose Camera is a camera made by Sandy. It just appears in the episode: Spy Buddies. When SpongeBob and Patrick want to become spies, they go to Sandy to get some spy gadgets. Sandy then shows them lots of stuff including the Nose Camera.
SpongeBob: Hey, Sandy!
Sandy: Hey, SpongeBob, Patrick. What ya'll doing?
SpongeBob: Do you know anything about spying, Sandy?
Sandy: Well, I know you need a lot of crazy gadgets like jet-packs, laser-equipped Bermuda shorts with walkie-talkies.
Man: 10-4, good buddy. (static)
Sandy: Cameras that fit up your nose, high-powered magnifying glass, and my favorite, the knockout ray. (blasts SpongeBob and Patrick with it causes them to knockout. Then blasts them again making them wake up)