Ten years prior to the events of the episode, a large, blue meteor crashed into a hospital and exploded into a large amount of dust. This dust settled onto an infant boy named Ricky in the hospital through an open window, and his dog, who was waiting for him and his parents outside. The dust's power was imbued in both of them. This gave the boy the ability to fly and super-strength, and his dog the ability to talk and walk on two legs. The two decided to use their new powers to fight crime for the next decade, with the boy assuming the name Kid Dynamo and the dog being called Lightning.
The nefarious Dr. Demise and his assistant learn of this meteor dust and the preceding meteor crash through a newspaper published at the time of the incident, the headline reading "Blue Dust Covers County General Hospital". Dr. Demise knew that Kid Dynamo was ten years old, and correctly theorizes that the dust is the source of his power. He and his assistant visit a local museum, where some of the dust has been preserved, and steal it for themselves. Dr. Demise believes that if the dust can give Kid Dynamo powers, it can also take them away.
When Kid Dynamo, Donkey Kong Jr. and Bones are lured into the villains' hideout to rescue Lightning from capture, Dr. Demise throws meteor dust at Kid Dynamo, stating that he has reversed the molecular structure of the dust. This causes it to have a red color instead of blue, and it promptly stops Kid Dynamo's powers from activating. Dr. Demise uses this opportunity to trap the three heroes in a trapdoor and leave for Sweetville Station.
However, the trio escapes from the trap and quickly free Lightning, who gives additional meteor dust to Kid Dynamo. The latter realizes he can turn the dust back to normal, restoring his powers. This enables Kid Dynamo and his new friends to thwart Dr. Demise and his assistant's attempted robbery.