Bookworm is an intelligent worm toy with a built-in flashlight.
He keeps a "library" of sorts in a closet at Sunnyside Daycare which holds instruction manuals for many different toys, including Buzz Lightyear. He gives Lotso a manual to reset Buzz, allowing Lotso to make Buzz one of his cohorts (as well as returning Buzz to when he thought he was a real space ranger in the first Toy Story movie).
Later, after Woody returns to rescue his friends and bring them back to Andy's house, Bookworm is seen again, handing "Spacesuit Ken" (unaware that it's really Barbie in disguise) a Buzz Lightyear manual, he reacts with disgust when he discovers that "Ken" is actually wearing pink high heels.
After Lotso is removed from Sunnyside, it is highly implied that Bookworm has been convinced of Lotso's departure so he reforms, as with the case of the other Sunnyside toys who have previously served Lotso. During the film credits, Bookworm is seen happily using his flashlight to illuminate a disco ball when a disco party is being held in the Butterfly Room.
Bookworm appears to have been based on the Glo Worm toys of the 1980s.
His name was based on the game BookWorm from PopCap.
Lotso seems to disapprove, if not dislike, him. This can be seen after he tosses Buzz Lightyear's manual at his feet, Lotso gives him a somewhat disapproving glance. This may also imply that Bookworm did not enjoy being one of Lotso's gang and only adhered to his orders because he was forced to. It is also implied that he saw through Barbie's disguise, but decided not to tell Lotso.