The Magical Pumpkin Seed summons a pet Squashling. It is obtain from harvesting fully-grown Pumpkins during Halloween, which has a 0.5*1/200 (0.5%) chance a Magical Pumpkin Seed to drop. When the player jumps high enough or outruns the Squashling, it will twirl and fly after the player.
Pumpkins can be harvested by any means (such as Actuators) in order to obtain the Magical Pumpkin Seed. This will make an effective farming system when combined with Conveyor Belts leading to the player's house or other collection point. (Or the slow way, which is destroying them with your sword)
The Squashling may be a reference to the Sinister Squashling, a visually-identical character from World of Warcraft and Hearthstone.