People often cite this skit as an example of how bad and gross Uncle Grandpa could get but I actually think its one of the best moments of the show, at least its weird in an artsy and memorable way rather than a long episode of insipid kiddy nonsense
This reminded me a lot about Flapjack, and why I respect random nonsensical humor when done well. Nonsense humor just has this certain charm and delivery that makes people laugh, regardless if they want to admit it or not they liked it.
Conspiracy theory: All this time people have been saying the show is made on drugs. To prove the masses wrong the creators made this while ON drugs to show the difference. Also, Mr. Gus' face/voice at 0:58 O____O