SMG4 reads from a book fabricating Mario's origin story.
The blooper starts off with SMG4 preparing to tell a story (with Latiku apparently editing the footage to put stuff like gay and the old man hobo besides SMG4), even after Latiku says "only gays tell stories" (like he's one to talk considering nobody loves him). Of course, Mario immediately comes and wants to hear the story.
While SMG4 reads the book, Mario constantly interrupts to say stupid stuff about the tale, but ultimately, it goes like this: One day long ago, Dialga and Palkia were discussing stuff. A while later, Wario immediately comes and poops while "shaking his booty". Unfortunately, the poop lands RIGHT on Palkia's head. Not knowing Wario was the culprit, Palkia immediately insults Dialga, which leads into a fight.
The battle ends with the two opponents firing Boom Sha Woop lasers at each other. As they collide, it creates a cosmic event... in the form of a tubby baby (Baby Mario). He was rude and stuff and fell down towards Earth.
After somehow not burning up in Earth's atmosphere, Baby Mario happened to land in Nintendo HQ, where the boss (Shigeru Miyamoto) is taking a dump. After seeing the tubby baby crash through the ceiling (cuz he's fat), he screams like a girl (while the Psycho theme plays) and runs away (due to Mario's insane ugliness, or the jumpscare due to falling). Deciding to confront the creature, he charges in and shoots the baby's head off (not actually, it was Mario being a dumbass and adding that in so it would sound cool).
What actually happens, is that he walks in calmly, and Baby Mario pulls out a knife, with evil laughter. Awed by the adorable, ugly baby. The boss needs a new character for his company. He needs to know if Baby Mario has what it takes. Baby Mario dances, and it's good, he then names him Mario and asks if he has aids. Baby Mario has Missingno aids, and the boss makes a game.
He then put Baby Mario in Baby Bowser's 'playground', and Baby Bowser gives out the rules, but Baby Mario poops on baby Bowser's leg. It also turns out Baby Mario actually gave birth to/shat out Baby Luigi (which possibly makes him his mum as well, but who knows by now, it's possible he reproduces by budding, but this is probably just a joke). The Boss was done with the game and needs a song for it. He gets one (stealing it from X) and Baby Mario drives a delivery truck and crashes. The boss looks at the results and fails. It was all Baby Mario's fault and the Boss kicks him out. Mario and Luigi take refuge by a dumpster, but Mario does not want to give up.
He blows up Nintendo with a bomb, and the two brothers lived there, and eventually grew up as two fatass Italian guys (presumably plumbers). While Mario's fussing at Luigi to stop wearing a dress, but Luigi protests he likes dressing up. Eventually, some nerd named SMG4 walks up and sees the two losers sitting there. He sees potential in them and asks if they want jobs. Mario and Luigi decide to accept and come back with him to Peach's Castle, where they meet Princess Peach and Toad. SMG4 has the Mario Bros. star in his videos, having misadventures and crazy antics, leading to SMG4's own Super Mario 64 Bloopers. Therefore, that's what leads to today. Mario is unimpressed and *** and the video ends.