A girl gets a weird DVD in the mail on her birthday. In the meanwhile, Hansel and Gretel, follow out their fairy tale, and arrive at a witch's house, after getting lost in the cartoon-like woods. The witch planned to poison them with a rat and a bottle containing Nitroglycerine, but instead of killing them, it turns them into big headed, crazy cartoon characters. They rip the witch in half and almost immediately they are pulled from their world, to reality and began watching it. Most of the party goers are slain in various ways.
The final girl and the boyfriend find out that Damian, Satan's son, (Shane Ballard) sent the duo after them, in the encounter, he shows them a new character, a giant worm-like monster. He then attempts to rape a girl and in the resulting fight, she gets infected with "the demon". After they escape, Damian turns into a giant horned demon. Hansel and Gretel prepare to send mom into hell with a rocket, but before they can, the boyfriend comes in, slices off Hansel's hand, in which Hansel and Gretel form together into the worm Damian showed them, as a final attempt at killing everyone.
Just when it was about to succeed, a girl comes in, and supports the beast against the wall, telling her boyfriend to destroy the DVD, which has since been a factory for the DVDs. The Boyfriend lights the rocket, and rides it into the machine, blowing up half the house, where he, the girl, and the beast are presumably killed in the explosion. The police arrive to help out the survivors The film ends with Damian dropping a box of Terror Toons off at a movie rental store, where he laughs maniacally and the screen cuts, reminiscent to the beginning.