The picture is of Bushnell presenting a "Petster" to a crowd at the New York Toy Fair in 1985. You can see the Catster version rolling around at the bottom of the image; they also released a dog, hamster and even spider edition of the toys. The idea was to sell robotic animals to people who want to have a pet, but don't care for the shedding or the pooping or the bringing of dead mice to the door as an offering to the master. At the time, Bushnell was barking up the wrong tree, and the prohibitively priced Petster line went nowhere. Petster did, however, help sow the seeds for spatially aware household robotics such as the Roomba and other robotic vacuum cleaners.
In the picture, even Nolan seems perplexed he's standing there trying to sell the idea that people would have this particular want. I'll leave you with a TV spot showing the Petster in action:
For more information on Bushnell and the foundation of Atari, consult your local Dot Eaters entry.
source: Computer Entertainment magazine, "Bulletin Board, Bushnell's Pet Project", pg. 8 June 1985