Calypso and Shao Khan have joined forces to organize the Games of Games, where heroes from each realm must compete for their lives. They are actually controlled by Polygon Man, who is secretly controlled by Kevin Butler. Little does anyone know that by combining two worlds, Kevin Butler is able to open up Subspace gateways within the realms and control everyone. Also, the game is really about how when Kevin Butler was a kid, he imagined all of these creations and grew up to make Playstation based on his fantasies.
Dreams create the world of Little Big Planet. But what happens when Sackboy dreams? Kevin Butler wanted to find out. And so the All Stars universe was formed. Butler wanted to capitalize this, so he put Sackboy in a comatic state; and Bulter,, being the demigod of gaming that he is, cultivated the space. Bulter started taking away parts of other worlds. In many universes voids started to appear. All Butler's knowledge of game spaces came in handy for this; so long as he had the money he could snatch from whatever IP he pleased. Now with his venue, he needed his players. Disappearances began to occur: Kratos, Fat Princess, Parrappa, Sly. One by one they began to be taken. Butler looked at the cast he had assembled and saw it was good. And on the 7th day he rested, watching his All Stars duke it out.
Kevin Butler, VP of Inter-dimensional Management, has been tasked for centuries to protect "The Power of Playstation."
However, unbeknownst to our clever VP (because it was his lunch break), the Negativatron has narrowly escaped death and has fled Craftworld for a much more devious plan. Instead of sucking his world, he now wants to suck away every world there is... at once.
It doesn't take long for him to wield the power, and in order to make sure his plan is a success he sucks away the biggest heroes from each world first, sending them to the lost abyss.
What he didn't count on was the failsafe. Upon doing this, the worlds begin to collide and as punishment for the tampering, the heroes must fight their way back to the natural order... that is, defeat the one who caused this to happen in the first place. Leading us to the first ever:
PLAYSTATION ALL STARS BATTLE ROYALE!
SPOILERS: The end of the game features Kevin Butler returning from his lunch break after everything has been restored thinking nothing happened.