At the beginning of the episode, Weasel is Baboon's lawyer, and the Red Guy is the judge. What exactly was the case is never really explained, but it can't be that important to the plot of the episode.
The Red Guy finds both Weasel and Baboon guilty of the most ridiculous charges, and sentences them both to attend a correctional facility! But, what kind of a correctional facility? The kind run by the Red Guy, of course. And, what is his policy about how to run the correctional facility? He has to correct everything about its prisoners, of course. Weasel has to be shaved, wear glasses and stilts. Baboon must wear a device that folds his ears to the front of his head so they can be seen. Other humorous incidents include the "Fred corrector", and that any mistake anyone would do inside the correctional facility, requires "time in the box" (meaning that he would literally have to stay inside a small cardboard box). But the catch is, no matter who is responsible, the warden is the one who has to serve time in the box!
A great episode, one of the best the show ever had. It's definitely worth watching, as it has some of the best jokes so far.