He was Robotnik's obscure cousin who tried to steal his thunder by building knockoffs of his machinery, including the Metal Sonics and the Death Egg II. This would also explain why he is smaller than Sonic himself in this game.
It showed that it survived its encounter with Sonic, agitated, although the fate of it is not shown afterwards.
- But why only the Sonic Clone? What about the other clones?
- Perhaps this theory assumes Sonic is the canon Player Character.
After beating everyone else, Robotnik (or Robotonic) promptly clones your character, presumably Sonic, for a Mirror Match. Upon defeating them, you then get the eighth Chaos Emerald. Considering everyone has Emeralds except you, as you don't start with one on your person, there's the chance that one of your Emeralds was cloned as well. Why the rocket needs eight Emeralds to begin with if there were only seven for real, however, is a different question entirely, unless your character was cloned in transit to reaching the rocket and thus conveniently got an extra emerald to help with the return trip as well.
- Two problems with this theory. 1) Why does only one of the emeralds get cloned and not all of them? 2) What if you start with Knuckles? He's always the first character, so the first of his fights means he wont start with an emerald to clone.
The game presents eighth emeralds simply to match up with the eight players and to act as a checklist/progress indicator during the results. The character you select doesn't actually have an emerald to start and is fighting everyone else for theirs. When Eggman arranges the mirror match, your character is merely beating the snot out of the clone Eggman made.
It's been shown across various different games that Chaos Emerald come in different sets with different quantities per-set, with games like Sonic 1 and the majority of the Game Gear titles only having a set of six, Sonic Labyrinth having only four and Sonic Spinball having as many as 25. It's possible that one of the emeralds is from a different set of emeralds, or that the rocket is using a separate set of emeralds that was easier to locate at the time.
- Nope, Sonic Spinball isn't part of the SegaSonic universe, and its emeralds are never called Chaos Emeralds. The games that have less than 7 Emeralds are easily explainable as the characters never finding the last Emeralds in-story.
In the original Genesis games, the Master Emerald was connected to the Chaos/Super emeralds and it was described as being guarded by Knuckles. While it still leaves the size of the emerald in-game inexplicably small, it would make sense that Knuckles would have the Master Emerald, connected to the Chaos Emeralds. In fact, that's probably why you beat up Knuckles first; you sneak up on him, kick his butt to the curb, and steal the Master Emerald to start tracking down the Chaos Emeralds.