Without all 7 emeralds you are unallowed to go to the
 FINAL FIGHT and finish the game properly. The FINAL FIGHT is
 not the same thing as Panic Puppet ACT 3. With all 7 they let you
 fight Dr.Robotnik's big battle craft that looks just like him. 
Here I'll write out the order of his actions.

       
Posted by That guy with the hat on July 27, 1999

In Reply to: A little bit of both. It took me an hour to beat him!!!! 
Hope you have better luck. n/m posted by Mager on July 27, 1999 at 15:27:49:

SQUARE ONE)He rises to the square you stand on with 6 laser cannons. 
On one side of the square you stand on there are 6 rings. Collect three 
of them, you'll need the others later. Anyway, he aims the laser cannons
(or laser hands) at where you are standing. When the hands stop moving 
jump away from their range so you are not fried. After he shots the lasers 
he will aim again, shoot again. This time, however, after he shoots he will 
enter your square. HIT 'IM! If you succesfully hit him he will jet off to 
the next square. A bridge will appear. Run across it quickly or Dr.R will 
detonate it.

SQUARE TWO) Robotnik's battle craft will jet in and shoot a homing flame 
at you. Keep the flame from reaching you and will eventually fizzle out. 
Robotnik jets in and shoots another. Keep it from hitting you. 
Robotnik will shoot another and then float into the square. Hit him again. 
He fly's to the next square. Another bridge.

SQUARE THREE) This time Robotnik comes through with a new pair of hands 
that are covered in spikes. He detaches the hands and they try to home 
in on the blue haired wonder. When the hands think they've found you 
they will attempt to swat you. Avoid the hands' grasp three times and they
will float to either side of your square, hit the ground, curl into fists, 
and charge at you. Jump over them. Robotnik, in I imagine quite a rage, 
plummets to your square and stops on a dime. He will then float into your 
square. Hit him. He jets away. Next bridge. Next square.

SQUARE FOUR) Robotnik hovers in with a missle launcher attachment and 
shoots about 7 missiles into the air. You guessed it, homing missiles. 
These 7 missiles are somewhat easy to avoid. Robotnik comes in and floats 
into your square. Hit him.

SQAURE FIVE) Robotnik comes in with a new attachment and blasts a barage 
of those little cannonball thingies that bounce all over the place. 
Avoid two of these cannonstorms and hit him when he floats in. Next bridge, 
SQUARE... ONE?! Yes thats right, you have to do the whole thing over again. 
Thats why you need the three other rings. After doing it all again 
succesfully everything blows up. Congratulations, you beat the game!