These are promotional give-away dolls from Denny's Restaurants in the USA. It is one of the few (4 known) Sonic Underground related items. What's so "Underground" about him? They added a tiny guitar shaped 'patch' as a hang tag around his neck, and wrote the word 'underground' on his tag. Whee.
Knuckles here is still in the bag, and he has nothing at all related to Underground about him, except the paper tag. He was in the show for ONE episode because Underground likes to ignore Sega. That's why.