As Shrek tries to tell his own version of A Visit from St. Nicholas (The Night Before Christmas); Gingy, Donkey, and Puss in Boots (Antonio Banderas) interrupt and each tell their own version of a Christmas story. Donkey tells of floats coming to the swamp. At the end, Donkey tells of licking an enormous Santa figure that is made out of waffles, but in reality he accidentally starts licking Shrek's leg. Puss tells his version of the story of Santa Claus, but ends up playing with the ball point of his Santa hat, while in reality he is playing with one of the baubles from the christmas tree. However, Gingy's story is not happy, but horrifying, as he tells about how his girlfriend Suzy got eaten up by Santa Claus. To which Donkey finds it unbelievable, with Gingy screaming You weren't there!. Donkey finds Shrek's Christmas for Village Idiots book, and the ensuing fight over the book destroys all of Shrek's decorations, furniture and the tree. Shrek then loses his temper and ends up ejecting his friends from his house.
Shrek, Donkey, and Puss in Boots fly on Gingy's bike to the Santa's house. Donkey enters the house first, and Shrek and Puss follow. Donkey finds the Santa and leads Shrek and Puss to the reindeer's pen. Shrek is surprised that Santa Claus is a real person.
After a snowball fight, the friends return to the swamp, and Shrek tells his story, featuring Ogre Claus. Soon they hear bells and go outside to see Santa and his reindeer, although Gingy runs back inside screaming in terror. (wikipedia)
While out on their travels, Shrek and Donkey meet some villagers on a medieval-themed island, namely the Knights of the Round Table, of which Shrek is King. Donkey sees the village like it's his own; he then leaves, but Shrek and the others find the place overrun by ogres and dragons, with their castle right next to the group. The knight brothers inform Shrek that he must restore peace to the land before he can be crowned as King, though he gives them no time to wait.