Tree House of Horror III: The Simpson's Halloween Special III - S4-E5
Plot hole: At the theatre in the "King Homer" bit, the audience are treated to a traditional showgirl spectacle. But the girls have no curtain behind them, and so the audience should have seen Homer the ape, but they act completely surprised a minute later when Homer comes on. (00:11:40)
Answer: Willy referred to an encounter he believed he had with actual aliens, while Wiggum thought he was referring to the arcade game.