Mario is watching the clock move back and forward, and wants it to go faster. He starts punching it and it freezes.
Mario didn't care about this and went to the Bob-omb Battlefield, where he found out that everything was frozen, and then went to the top of the mountain, to find the King was gone. Mario wondered where The King was. Mario then thought that Bowser would have done it.
Mario went to go check but Bowser was also frozen. Mario then checked on Peach, frozen as well, he thought that Peach did move at least a bit, but she didn't. Mario assumed she was asleep.
Mario then tried to be frozen too but failed miserably. Since Mario didn't know what to do, he went to have some fun, but he missed the games that needed other people, so he had to fix it, but his head was hurting from thinking so much. Mario needed help, and then heard a voice. This was "The Strategy Guide", who was looking for the clock, so Mario entered it to show him. Mario then saw that a part of the clock had a Mushroom stuck inside it, so Mario took it out and time started working again. Mario then went out of the clock and accidentally hit it again, freezing time again.
Mario revealed that he has no brain, which may explain how "retarded" he is.
Bowser and Peach blink because the Gameshark Code doesn't disable the texture animations. This is probably a separate run of code not affected by what was making everything frozen.
The Strategy Guide was probably part of Mario's imagination, because it actually could talk while everything but Mario was frozen.
When Mario ran up and found the King was not there, this could've actually been because the game thinks Mario is at the starting area and hasn't loaded the King yet to save memory.
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