So far so Sesame Street. But as the sketchbook begins to preach the wonders of creativity more and more aggressively, slowly but surely the puppets descend into madness.

The horribly funny puppet show Don't Hug Me I'm Scared first landed on YouTube in 2011, and the voice of that sketchbook has haunted my dreams ever since. It belongs to Becky Sloan who, alongside co-creators Joe Pelling and Baker Terry, is currently haunting us all over again with a new expanded series on Channel 4. Red Guy, Yellow Guy and Duck (a man in a red onesie and a mop for a head, plus two puppets) are back to face a new bunch of evil inanimate objects, but this time they are tortured over six, 30-minute parts. It's Sesame Street by way of David Lynch, and instead of the life lessons, you get a heaping of existential dread.

For such a brilliantly idiosyncratic series, they make it sound surprisingly straightforward. "It may have been as simple as, 'Wouldn't it be nice to build a felt set and some puppets in this corner of the studio to just mess around with,'" says Pelling of its genesis. Sloan says they were also inspired by kids' shows from the 1950s and 60s, shows that may have aspired to innocence but that, now outdated, feel creepy, like the "very English and weird" Watch with Mother (1952-1973).

The two met at Kingston University where they were studying similar courses (Pelling - Illustration and Animation, Sloan - Fine Art), and having graduated they were renting a studio together to get creative at weekends. "We would make some pretty terrible stuff together," he admits, "stuff that no one should ever see." But it was on just such a weekend that they roped their friends into the haphazard - and hazardous - first shoot for Don't Hug Me I'm Scared.

"I think they just thought we were moronic art students who'd gone too far. Which, to an extent, we were."

It turns out that they stumbled onto the inanimate object motif. "The sketchbook was meant to be a little girl puppet, but I couldn't make it because I was really bad at making human characters," admits Sloan. "The day before shooting, I remember Joe being like: 'maybe we should have made the main character first...'" And so the sketchbook was born.

Meanwhile their shoestring budget could only afford them "these shitty lights from eBay," says Sloan, and during an all-nighter they ended up melting the roof. The fire brigade were called and what they found when they turned up sounds like a murder scene: blood and organs splattered the table, and someone was fanning the fire alarm with a blood-soaked table cloth. Thankfully, says Pelling, "I think they just thought we were moronic art students who'd gone too far. Which, to an extent, we were."

It was certainly far enough to go viral, and truly viral at that. Don't Hug Me I'm Scared was one of those mysterious videos that seemingly emerged from the ether. Lending itself to scaring your friends, it fast became a word-of-mouth hit and gathered a cult following. The view count now sits at 70 million.

It wasn't the first film to corrupt children's TV for laughs and scares, nor even to use puppets for those ends. But whereas most had dialled up the filth and gore for shock value - i.e. your Team Americas and Chuckys - Don't Hug Me I'm Scared was more insidious. It set the tone for the films that followed: what begins as a cheerful guide to an everyday subject inevitably takes a dark turn, as the object-teacher becomes increasingly tyrannical and the portents like raw meat pile up. "We're conscious of not doing horror and gore for the sake of it. We would rather create an unsettling feeling that you can't quite put your finger on why," says Sloan.

After that first short was screened at Sundance Film Festival in 2012, Channel 4's Random Acts commissioned a second episode in 2013 and a Kickstarter campaign raised over £100,000 for four more. Their journey to TV, however, would take a bit longer.

Unwilling to compromise, it took them a while to find the right commissioner. They made an initial pilot for a US company back in 2016, expanding the world, adding a load of new characters and even some commentary on current affairs. But in the process, says Sloan, "we lost the creepiness and claustrophobia at the heart of the show."

Also missing was the unnerving ambiguity, adds Pelling: "looking back at those strange early kids' shows - there's no premise to them, they just start and there's no explanation. It's more like a dream or something." Here another "big inspiration" of theirs comes to mind in Gerry Anderson's Candy and Andy, a book of disturbing stills that told stories of mannequin children whose parents (or captors?) were panda bears, with no explanation as to why.

As for the current affairs stuff, Terry says: "[the show] takes so long to make that anything current when we write it becomes ancient history."

The company in question went under and the series never got made. But they now see it as a blessing in disguise because when Channel 4 came calling again, they had clarified their vision.

The new series confines the surrogate family of three to the original chamber of horrors, where they can do nothing but wait for the object of the day to burst into song. In the first episode, a briefcase starts waxing lyrical about jobs only to abandon them in a factory: Peterson's And Sons And Friends Bits & Parts Limited. And as the conveyor belt eats and regurgitates the same parts, rusty vending machines spit out brown sludge and colleagues parrot inane banter, they gradually learn of the mind-numbing and time-warping mundanity of employment.

There are arcs to the stories, but the laughs come from such unexpected places that it's hard to tell exactly how it's scripted. Don't Hug Me I'm Scared is a world where a character might start talking to a welt on his arm, or a urinal might hop off the wall to nip out for a crafty cigarette. The conversation I have with the team, regularly derailed by their hilariously silly riffs, offered some clues. As did Sloan's admission: "I wish we had a structure that we could map to, but it just ends up being billions of Post-it notes on the wall."

It helped to have off-beat comic Sam Campbell providing "an abundance of jokes," says Pelling, who he calls "the funniest person ever." And they also consulted sitcom veteran Megan Ganz (Community) for her story structuring chops. Because unlike the original series that largely took the form of music videos, this one tells "long-form stories that ebb and flow and give the characters their own little desires," says Pelling. Wary of becoming too formulaic, however, they tried to "keep an eye on both structure and chaos."

Professional puppeteers were also brought in and Pelling says they were "amazed" by "just how much nuance" they added to the performances. Especially to Yellow Guy who, he points out, "doesn't even do anything. He doesn't have any blinks or stuff like that, so it's just a head." He highlights the last episode where there is a lot of Yellow Guy "processing stuff" and it's up to his head to convey a whole spectrum of emotions.

There is a lot to process across the whole series, but whenever I started digging for interpretation, they refused to engage. Pelling says it's because "we love the fact that people dissect the show and we don't want to get in the way of that."

They do admit to planting Easter Eggs for their more devoted day ones, but when I ask for examples, Pelling parries again: "If you look very carefully, you'll see one of the characters has got a nose..."

Don't Hug Me I'm Scared is now available in full on All4.