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Terry's Terroids is a Key Item given to you by Terry Hintz right after fighting Walter Stingray, shortly after the game's intro. In the Definitive edition of Joyful, it's also found in Land of Hints, in the second house.
Description: Permanently activates Painless Mode difficulty. Side effects: May diminish your pride
When selected in the Key Items menu: There's a slightly stained note attached: Having some trouble with your performance? Hey man, I'm not judging. The worst thing you can do is give up. This confidence booster can even the odds against most foes. It's not cheating if you don't want it to be. Just Remember: the effects are permanent. Before you do this, maybe save at a crow using a different slot? In case you regret it later. Giving you the tough choices in life! - Tempting Terry
After use, it plays a woo noise and informs you, 'You suddenly feel like you're going to have a better time.'
The item seems to significantly decrease enemy armor and/or health, and increase party ATK, though there's no clear indication as to what extent. There appear to be no other side effects. (The "may diminish your pride" note is likely just to guilt you into not enabling easy mode. Like Terry said, it's not cheating if you don't want it to be!)