Mermaid Man and Barnacle Boy are watching TV in Shady Shoals, when SpongeBob and Patrick suddenly appear and wake then up. Mermaid Man attacks SpongeBob with the "Mermerang", thinking he is a supervillain, and in the resulting incident Mermaid Man and Barnacle Boy are injured and sent to the hospital.
While SpongeBob and Patrick go to the hospital to visit them, Mermaid Man and Barnacle Boy receive a call from the police commissioner, telling them that they will be celebrity guest contestants at the Bikini Bottom shuffleboarding competition. They are unable to attend in their condition, but SpongeBob then says both he and Patrick are both certified Mermaid Man and Barnacle Boy impersonators. They are given rings which produce rubber Mermaid Man and Barnacle Boy costumes, and are told to immediately return then after the tournament.
After they win the shuffleboarding contest, they go to return the costumes, but Patrick convinces SpongeBob that if they don't save the town from evil, no one will. They begin throwing everyone they see in jail for completely unjustified reasons (including throwing away a Krabby Patty, chewing gum too loudly, and being "too old"). Eventually, they have arrested nearly everyone in Bikini Bottom, and decide to return the costumes. However, they see Man Ray entering a laundromat, and despite the fact that he is doing absolutely nothing wrong, follow him in and arrest him after a fight scene, involving throwing Man Ray's head in the dryer, causing it to shrink. The jail is now so full of people that it literally explodes, causing people to fall down from the sky. SpongeBob and Patrick return the costumes, and Mermaid Man and Barnacle Boy leave the hospital, but are confronted by an angry mob of the people SpongeBob and Patrick wrongfully arrested, who start chasing them and idiodically Spongebob and Patrick confuse them for fans.
Man Ray never attacked SpongeBob and Patrick at the Laundromat until they attacked him. This is possibly because Man Ray is still good from episode "Mermaid Man and Barnacle Boy III".
This is one of the number of many times that SpongeBob and Patrick dress up as Mermaid Man and Barnacle Boy.
This is the one of few episodes where SpongeBob and Patrick broke the law. The law they broke was False Arrest (that means arresting innocent people for nothing).
First time he broke the law was reckless driving in boating buddies and doing time, cause in panic in hall monitor.
Oddly, SpongeBob doesn't have any fears about breaking the law. Most likely because he doesn't know what he is doing or is stupid. In Life of Crime, SpongeBob and Patrick were scared of getting caught after taking the balloon, then cries in tear after confessing to the police that they did steal the balloon.
Reasons for the people being fake-arrested:
Riding a store electric horse. (They thought the kids were loitering)
Waisting a Krabby Patty. (This hurts SpongeBob's feelings really bad, since he worked so hard making those Krabby Patties)
Chewing too loud. (Patrick should just tell him to just stop chewing his gum so loudly)
Shoes untied. (SpongeBob should have just reminded him to tie his shoe or helped him)
Being too old. (The old lady should just be in a retirement home instead of jail)
Mermaid Man and Barnacle Boy broke the fourth wall when they introduced themselves to the audience.