Correct spelling, explanation: dug is the past simple form of the verb dig. It is an irregular verb, so the spelling is different. The rule for regular verbs is that the suffix -ed should be added to the core verb. This is why a misspelling dugged can sometimes be observed, however, it is not correct. Being irregular, dig has the past form dug.

Definition of dug:
verb, the past form of dig; to remove soil or sand for example in order to create a hole in the ground
The police dug through the suspect’s backyard, but they didn’t find the body.
My dog dug in my grandma’s vegetable garden and now she’s angry with me.

Incorrect spelling, explanation: there is no such word as dugged. The misspelling is probably due to adding the suffix -ed to regular verbs in past simple and past participle forms. The verb dug is a past form itself, though. The core verb is dig and it is irregular so dug is the past simple and past participle form of it.

Incorrect spelling

Incorrect spelling