The mudkip joke is a reference to the fact that Mudkip is a Water-type Pokémon. The joke is:
What type of Pokémon is afraid of ghosts?
A Mudkip! (Mudkip scared, mudskip)
The joke is funny because it plays on the fact that "Mudkip" and "mudskip" sound similar, and because Mudkip is a Water-type Pokémon, which are typically weak against Ghost-type Pokémon.