This is referential comedy done really well. First, the source material for the references is a excellent choice as Super Smash Bros games are referential also, allowing the draw of possible references to be as big as the entire Nintendo library if so desired or even just the characters (and bonus) that have appeared in that series of games, it allows for amazingly large amounts of niche call backs. Second, it takes the opposite approach of what we know to be true in nearly every Nintendo game, even the enemies aren't "dark n gritty" at the best of times and no one dies (and if you think they do, they are sure to return as a mysterious character or recover even more mysteriously). This reminded me a lot of the other recently debuted Doomsday Arcade, though their referential material seems to be all video game characters bar none and a much more silly in your face comedic stylings. Here, the humor is definitely in the reference and dark twist. On top of that, the costume and special effects department for this should definitely be rewarded for doing such good work in the SSB visual references, certainly better than what Hollywood pulled off with its Super Mario movie.
Also, definitely reminds me of this:
Mario: Game Over
http://ca.youtube.com/watch?v=JpBGRA6HHtY