What is this!

A sprite of Barrold Krimbim for Zelda: A Link To The Past.

Ok but how do I put this stinker in the game??

You can use pngto4bpp to convert the exported .png sprite sheet into a .spr sprite sheet.
Then you gotta jam that into the ROM somehow. I haven't been so far yet, so you'll have to find out yourself somehow, sorry... But the ALttPNG repository is sure to have some kind of pointers, probably!

I think he needs more gottems and stink lines...

You can check out the ALttPNG Wiki and SpriteAnimator to get a quickstart into making your own or editing existing sprites!
If you want to edit this sprite sheet in particular, you will have to use GIMP for your editing. Or maybe photoshop can properly handle .xcf files nowadays ¯\_(ツ)_/¯
If you have never done any sprite work before, be aware of the limited color palette. I strongly suggest to read the ALttPNG Wiki before diving in.

If you have any improvements, feel free to make a pull request!