From the Super Mario Wiki
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The stage starts off on the floor of a living room; one of the four kinds of dogs or occasionally a cat may appear in the background. During the match, blocks and various other objects fall from above, creating platforms for the fighters to stand on that disappear after a while.
The Final Destination form of the stage is set on top of a flat platform made out of blocks. The floor underneath the stage is at a lower level, allowing for falling KOs.
Living Room reappears in Super Smash Bros. Ultimate, where it has updated graphics.
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