Everything we see is just the wonderful delusions of Ed.Basically: One day, after watching too many movies and playing too much Kingdom Hearts, Ed came up with a story (Rise of Maleficent) and told it to Double D and Eddy. Eddy realized that if he could get Ed to watch more movies and play more video games, he could charge the neighborhood kids a quarter each to listen to his stories, and acted upon this idea. Contrasting the usual failure rates of the Eds' schemes, this actually became a success; the kids loved to hear these tales, and kept paying for more. As long as Ed is given movies and video games (and, eventually, TV shows) to work with, stories will keep coming out, and the Eds will get richer and richer. And Ed is perfectly open to suggestions; Double D's prominent Creator's Pet traits and the shoehorned morals were added at the request of Double D himself (he didn't want to be portrayed as "the wimpy one" in the stories, and figured some education value should be in them). And eventually, someone will ask for a different set of protagonists, causing Ed to come up with The Loud Ghostbusters series.
WMG / The Ultimate Ed Chronicles