In a parody of the 1958 film, Attack of the 50 Foot Woman, Homer goes to Lard Lad Donuts to get a "colossal doughnut." Upon realizing that the colossal doughnut is the name of the doughnut that Lard Lad holds and colossal doughnuts that size do not exist, he denounces the store and vows to get a colossal (sized) doughnut. That night, he steals the giant doughnut from the Lard Lad statue in front of the store. In the midst of a freak storm, Lard Lad and other giant advertising statues come to life to terrorize Springfield. Homer eventually returns the donut to Lard Lad, but that does not stop Lard Lad and his friends from causing any more destruction. Lisa goes to the ad agency that created those advertising characters, and an executive suggests the citizens stop paying attention to the monsters as they are advertising gimmicks, and attention is what keeps them motivated. He suggests a jingle will help distract people from watching the monsters. Lisa and Paul Anka later perform a catchy song and the citizens of Springfield stop looking at the monsters, who lose their powers and become lifeless, except for Lard Lad, who manages to tempt Homer into looking into his donut, stating that it now has sprinkles. Homer falls for it, but Bart and Lisa pull him away from it, threatening to poke out Homer's eyes if he does not comply, much to Homer's anger. This causes Lard Lad to lose his power and become lifeless.
In a parody of A Nightmare on Elm Street, Bart has a nightmare that Groundskeeper Willie is out to kill him. He is slashed with a rake, and the scratches are still on his body after he wakes up. Many other students at Springfield Elementary School also confide they were terrorized by Willie in their nightmares. When the students take a test, Martin falls asleep and is strangled to death by Willie in his dream, before waking up and dying in the real world. Bart and Lisa tell Marge, who explains Willie was burned to death (on Homer's part of turning up the heat and causing the furnace explosion that killed Willie, the school's failure to upkeep essential maintenance such as replacing doorknobs and recharging fire extinguishers, and Homer's misunderstanding) while the parents of the students looked on and did nothing. Willie told the parents he would get his revenge by killing the children in their dreams, where the parents cannot protect them. Bart, Lisa and Maggie try not to fall asleep for several days, but eventually Bart decides that he is going to have to go to sleep and fight Willie in his dream. Lisa is supposed to stay awake and wake him up if he seems to be in trouble. Bart falls asleep and attempts to find Willie, who appears as a lawn mower/harvester. Bart, taunting Willie by calling him "Yard Boy" (a parody of the lawn tractor company), manages to trick Willie into mowing over a sandbox containing quicksand, and Willie sinks. Willie recovers and turns into a giant bagpipe spider and is about to kill Bart when Lisa enters, trying to wake him up. Bart realizes that since she is in the dream, that means she has also fallen asleep. At that point, Willie grabs Lisa, intending to kill her too. They are about to lose the battle when Maggie appears and uses her pacifier to seal the vent on Willie's spider body, resulting in Willie exploding. When they wake up, they find Willie is still alive and unsuccessfully attempts to both scare them and kill them.
In a parody of the Twilight Zone episode, Little Girl Lost, Patty and Selma visit the Simpsons with two pillow cases full of seashells from their trip to "Sulphur Bay" from which they plan to pry hermit crabs. Homer tries to hide in a closet that Bart and Lisa have occupied, but they refuse to leave. After failing to find another hiding spot, Homer, desperate to avoid Patty and Selma, looks behind a bookcase and enters a mysterious new world in which everything is in 3D. Homer explores the peculiar area, being depicted as a 3D computer-generated character. Bart and Lisa are found by Selma and are forced into the hermit crab work.
Through the wall, Homer calls Marge for help. Marge summons Ned Flanders, Reverend Lovejoy, Professor Frink, Chief Wiggum, and Dr. Hibbert to help Homer escape this alternate dimension, but they are of no help. Homer explains that the world he is in looks like something from Tron, but no one understands the reference to that computer-generated film. Frink explains to the others that Homer is in a hypothetical "third dimension".
Homer throws a cone into the floor and accidentally pierces the fabric of the space-time continuum, causing it to collapse into a wormhole and threatening to pull Homer and the rest of the dimension into a black hole. Bart takes command and enters the third dimension to save Homer, after tying a safety rope around himself. Once there, Bart tells Homer to leap over the increasingly massive wormhole. Homer, declaring this to be a "piece of cake", leaps and falls into the hole as the universe collapses on itself. Bart, however, is pulled back into the house. Lovejoy assures Marge that Homer has gone to a better place. Meanwhile, Homer lands in a dumpster in a live-action West Hollywood. He is initially nervous and scared of his surroundings including the astonished passersby, but his troubles are soon put aside when he comes across an erotic cake shop and he goes inside.
Homer3 later became a segment in IMAX's CyberWorld 3D.