Gingerbread Man: Fire up the ovens, Muffin Man! We got a big order to fill.
Puss-in-Boots: I hate Mondays.
Princess Fiona: Is that glitter on your lips?
Prince Charming: Mmm, cherry flavored. Want a taste?
Puss-in-Boots: Fear me, if you dare.
Captain of the Guards: Yep, that's catnip...
Puss-in-Boots: Um... That's... Not mine.
Donkey: Oh, Shrek. Don't worry. Things just seem bad because it's dark and rainy and Fiona's father hired a sleazy hitman to whack you.
Shrek: Quick! Tell a lie!
Pinocchio: Uh, what should I say?
Gingy: Anything, but quick!
Donkey: Say something crazy, like, I'm wearing ladies' underwear.
Pinocchio: I'm wearing ladies' underwear.
[Nose doesn't grow].
Shrek: [Laughs] Are you?
Pinocchio: I most certainly am not.
[Nose grows].
Donkey: It looks like you most certainly am are.
Pinocchio: Am not.
[Nose grows].
Puss in Boots: What kind?
Gingy: It's a thong!
Pinocchio: They're briefs!
Gingy: Are not!
Pinocchio: Are too!
Gingy: Are not!
Pinocchio: Are too!
[Nose continues to grow].
Answer: The gag is that the wolf has developed a peculiar sexual fetish: he wears women's clothing for fun and is attracted to pigs. The magazine was changed for the trailer to be less suggestive (and thus to make the trailer G-rated).