SHORT VERSION: In the final confrontation between Loki and a masked Tim over Alvey, Loki realizes that they are evenly matched in power, so he sets Alvey down between him and Tim to let Alvey choose who he wants to be with. Tim soon takes the mask off and appeals to Alvey as himself, saying that he has helped him grow up and now he wants to help him grow up, and this sways Alvey over to him. Saddened and angered, Loki tries to kill Tim, but the time limit Odin had set for him to get the mask before he stripped him of his powers runs out, and Loki is rendered powerless.
Odin appears and chews out Loki for failing him again and tells him he has brought him much pain, and Loki retorts that the feeling is mutual. This prompts Tim to step in and tell them both that nothing is more important than your relationship with your family, and he encourages them to sort out their differences now so they can enjoy the rest of their eternal lives. He then hands Loki the mask, who then hands it to Odin, and he and Loki return to Valhalla together.
Tim gets hired back at Animagine after pitching a CGI-animated show based off of the rivalry between Alvey and his dog Otis, and the show becomes a hit. After watching an episode together with Alvey, his wife Tonya tells him that she is pregnant again.
Loki (Alan Cumming) eventually discovers that Alvey (Liam & Ryan Falconer) is the baby borne of the mask, so he confronts Tim (Jamie Kennedy) in a street and demands to know where his mask is. When Tim can’t provide an answer, Loki attempts to do harm to him to jog his memory, but Odin (Bob Hoskins) takes over the body of a cop and restrains Loki, allowing Tim to run away. Loki gets free and pursues him, and he ends up cornering Tim at the end of an alley. He tries to blow Tim up with a giant grenade, but Alvey defends his father for the first time by shielding him from the blast. As Loki readies a second attack, Odin takes over Tim’s body and tells him that he has defied him for the last time. Loki tries to tell him that the baby is here right now, but Odin strips him of his powers and leaves, and then Alvey sends him into a dumpster. Tim then gets a call from Jorge (Kal Penn) reminding him that his pitch meeting with the heads of Animagine is happening now, but he shows up to it all mentally rattled, in shambles, and unprepared, so his boss Daniel (Steven Wright) fires him.
That night, Loki goes to Tim’s house and sneaks into Alvey’s room, and there he performs a conjuring ceremony to summon Odin. Loki tells him that he has found the baby with the powers of the mask, and that he would’ve gotten him earlier had he not interfered and took his powers away. Impressed with Loki (for once) for finding the child, Odin decides to give him one more chance to reclaim the mask, so he restores his powers for one hour. The noise wakes Tim, and he goes to check on Alvey, but finds himself face-to-face with Loki. Loki grabs Alvey and tells him to bring the mask to the alley they were earlier at within the hour if he wants to see his son again, and then flies away.
As he leaves, Tonya (Traylor Howard) returns from her business trip, and Tim fills her in on how Loki has their son and wants his mask back, which Otis must have. Knowing that Otis would most likely be with his love Venus, Tim heads to the home of Venus’ owner with Tonya and finds him there with her, and Tim explains how Loki has Alvey and that they need the mask so they can save him. When Otis refuses to help due to feeling neglected ever since Alvey was born, Tim tells Otis that he is his best friend, and that he is sort of like Alvey’s big brother, so Alvey will someday become his “bestest” friend. Convinced of Tim’s love for him, he kisses Venus, removes the mask, and comes with Tim. Meanwhile, in the alley, Loki tests Alvey’s abilities and becomes incredibly impressed with what the kid can do.
Tim, Tonya, and Otis show up to make the trade, and though Tim gives Loki the mask, Loki decides to keep Alvey, having grown attached to him. Otis comes up and bites Loki in the crotch, making him let go of the mask, and it falls on Tim’s face and turns him into the Mask. Loki then escapes with Alvey, and the good guys chase him all the way to the city stadium, and there, Tim and Loki do battle.
After a short time, Loki realizes that he and Tim are evenly matched, so he halts the fight and suggests to Tim that they let Alvey choose who he wants to be with. Tim agrees and sets Alvey down between them, but Alvey soon starts crawling towards Loki. When Tim can’t lure him over to him in his masked form, he removes the mask and pleads with Alvey to come to him, saying that he has helped him grow up, and now he wants to help him grow up, and says that he loves him. Alvey says “Da-da” and crawls over to Tim and Tonya.
Saddened and angry, Loki attacks the Averys, but before he can kill Tim, his time runs out, and he is stripped of his powers again. Odin then shows up and calls Loki a failure and tells him he has brought him much pain, and Loki fires back that he feels the same way about him. Before Odin can strike him, Tim steps in and tells them both that nothing is more important than your relationship with your family, and he encourages them to resolve their issues now so they can enjoy the rest of their eternal lives. He then hands Loki the mask, and Loki gives it to Odin. Odin tells Loki to come home, and they wave goodbye to the Averys and return to Valhalla.
Tim ends up getting hired back at Animagine when he pitches an idea for a CGI-animated show called “Sibling Revelry”, based off of the rivalry between Alvey and Otis. The show is made and becomes a hit, and after the Averys finish watching an episode, Tonya reveals to Tim that she is pregnant again. As they kiss, Alvey smirks and winks at the camera.
Thanks Tornado Dragon!