Back in the present (the present as of 1993), A talented A.I. researcher named Rick is working as a care taker for the Bodega Bay Hotel, while also doing research on A.I. He finds Toulon's puppets in their travelling case in the wall where Toulon hid them after committing suicide in the late 40's to prevent nazi spys from attaining his secrets. Meanwhile, in hell, a demon named Sutekh, decides that he hates how people keep animating things so he mails some animated dolls to Rick and some of his co-researchers to kill them.
Toulon's puppets end up rebuilding an unfinished puppet called Decapitron. Sutekh's animated dolls (known as Totems) end up at Bodega Bay they all fight.