GIVEN THE frequency of allusions to movies and television in "Shrek 2" -- a sequel that is better and funnier than the original, which, as you may recall, was pretty darn good and funny to begin with -- it is wickedly appropriate that most of the action takes place in a land that, for all intents and purposes, is Hollywood.

Mind you, it's called the kingdom of Far Far Away, but from the billboard-size letters on a hillside spelling out its name to its Rodeo Drive-like shopping district and palm-tree-lined streets, the computer-animated locale can be nothing other than a fairy-tale version of Tinseltown (if that's not redundant). Which makes perfect sense, given the nearly nonstop barrage of inside-jokey references to "From Here to Eternity," "Alien," "Mission: Impossible," "The Lord of the Rings," "Spider-Man," "King Kong," "It's a Wonderful Life," "The Mask of Zorro," "Cinderella," "Beauty and the Beast," the TV show "Cops," the Oscar telecast and about a thousand other references to La-La Land I didn't have time to write down.

Why would I want to spend the whole movie with my nose buried in a note pad? I might have missed a laugh. As with "The Simpsons," another gold mine of knowingly self-referential humor prized for its high-volume use of evanescent sight gags that whiz by in the background, "Shrek 2" seems made for repeat viewings on video or DVD. The gags fly past so fast and furious here that it's impossible to catch them all without a pause button.

Picking up where "Shrek" left off, our story begins with the honeymoon of ogre Shrek (voice of Mike Myers) and Princess Fiona (Cameron Diaz), she having been only recently rescued from a dragon-guarded castle by the Green-Skinned One. It isn't long after eloping, however, that the newlyweds are invited by her parents, the King and Queen of Far Far Away (John Cleese and Julie Andrews), for a visit. Now, this may seem strange, given that it was Mummy and Daddy who locked Fiona away in a castle to begin with. This was their somewhat medieval solution to the curse that had turned her into a hag each night after sunset. Despite this, they're not, pardon the expression, ogres.

Nevertheless, Fiona's folks are more than a bit disappointed in their daughter's choice of husband, having hoped that the vain, Brad Pitt-like Prince Charming (Rupert Everett) might have been the one to sweep their little girl off her feet and break the spell. Turns out, though, Charming was a little late getting to Fiona, who is now stuck, 24-7, with skin as green as Shrek's.

Tensions, needless to say, run high during these awkward, "Meet the Parents" moments. So high, in fact, that the King hires a killer named Puss in Boots (Antonio Banderas) to off his son-in-law, even as Shrek runs away seeking assistance from Fairy Godmother (Jennifer Saunders) in a mission to find a spell that will make himself more lovable.

Hilarious complications, as they say, ensue, thanks in no small part to the supporting cast. Chief among them is Banderas, mocking some of his own derring-do roles (not to mention his Latin-lover shtick) with gleeful, scene-stealing abandon. Saunders, of "Absolutely Fabulous" fame, brings a deliciously nasty edge to her role as the meddling mother (yes, Prince Charming is her son). Holding a dark secret over the King's head as blackmail, she's about as far from the benign, Disney-fied wand-waver as possible. Reprising his role as Shrek's talkative asinine animal sidekick, Donkey, Eddie Murphy is good for a few more laughs, too. Still, the one-note burro's no match for Banderas's tomcat, who gets as much comic mileage from his propensity for making sad-eyed cat faces -- just before pouncing -- as he does from his ability to lick his own crotch.

But it is Myers and Diaz who breathe the most life into their computer-animated characters -- and the film. As they did in the first movie, they make Shrek and Fiona so much more than cartoons. Sure, the animation work is great, but it's the actors and their subtle, complex vocal performances that make us care about these fairy tale characters. "Shrek 2" is all about fantasy, but its characters are rousingly, affectingly real -- not to mention real, real funny.

SHREK 2 (PG, 93 minutes) -- Contains some edgy humor, mild jokes about body fluids and gasses, vaguely sexual references along the lines of "a roll in the hay" and slapstick violence. Area theaters.

Shrek (voice of Mike Myers) and Princess Fiona (Cameron Diaz), share a romantic picnic, but the honeymoon may soon be over.