Ok, so this guy named Mike Painter who’s a child psychologist, returned back to his childhood home of Iron Hill, Ohio because “voices” were telling him to go there. In Mike’s case, the writing’s on the arm - not the wall.
Mike used to have a twin named Eddie. When they were 12, Eddie and a bunch of other neighborhood kids were killed in what’s now known as the Iron Hill Murders. The cases were never solved but Mike thinks (read: he knows) that the murders were connected to a creepy cable access TV show called Candle Cove, which only aired for a couple of months.
After Mike arrives back in Ohio, kids about town start acting strange. And by strange we mean murderous. Katie, the daughter of Mike’s childhood crush, Jessica, stabs her older brother with a fish hook and lands herself a stay in the psychiatric hospital where she’s visited by The Tooth Child.
Instead of seriously pondering where in the hell Katie got the fish hook, Katie’s dad and town sheriff, Gary, conducts an impromptu interrogation on Mike and try to pin the old Iron Hill Murders on him.
Mike admits to killing is brother Eddie but said that he only did it because Eddie was out of control, killing all of their friends while under the influence of Candle Cove. This ties up the loose ends for the 1988 murders but what about the rash of murders going down now?
The new murders are being done by Mrs. Booth, an unassuming Iron Hill English teacher. She's either killing people herself, or project managing local kids who are committing murders. Did we mention that al the kids are watching Candle Cove?
In flashbacks, we see that Mrs. Booth, an epileptic, was Eddie's teacher and he used his mysterious powers (which seem to be telekinetic in nature) to stop her seizures. This made her worship Eddie with almost God-like devotion. What's more twisted is that she KILLED HER OWN KID under Eddie's orders.
Also? Lily says that she’s not Lily. “Not Lily” claims to be the spirit of Eddie and tells Mike to burn his corpse in order to set his spirit free. Mike, along with Jessica, oblige the spirit of Eddie but that only seems to unleash more crazy in town.
Jessica is stabbed to death by a bunch of kids while Booth supervises. Booth later tells Mike that his long dead brother Eddie actually created Candle Cove and that he’s aiming to make an Iron Hill come back, too.
Lily ends up **inside** the TV world of Candle Cove, while Mike notices that Eddie is trying to take over his body (as evidenced by the extra tooth he's growing). Mike travels to nightmare space that exists between the subconscious and the conscious. There, he has a chat with his eternally 12 year old brother Eddie. Eddie says that he’ll let Lily go but only if he can hitch a ride back into reality via Mike’s body.
Mike stalls Eddie long enough so that their mom, all stabbed up and fresh off of a fight with Booth (who got a deserving fish hook to the head) can get over to Mike’s unconscious body and smoother him, sealing off any possible entry ways for the bad seed twin, Eddie, to get back into Iron Hill. Tough call but somebody HAD to do it.