The Fairy Tale Woods is an area accessible from the Scenic Outlook.
Features
The pathway accessible from the Scenic Outlook is lined with streetlights, and the main area consists of dull grass with presumably trees outlining the paths and strange blue orbs scattered around. If you go right from this entrance, you will see two streetlights. If you go between them, you will be transported to a small area with some holes in the ground restricting you. On the opposite side is what
appears to be a lumberjack.
If you go up from this entrance, you will see some monsters parading around an apple on a tree stump. You can get past them by going through the gap in the ring they form. On the other side is a well with a rope coming out of it. Interacting with it will untie it and you will hear a scream, showing that there was someone on the end of it trying to get out. When you exit the woods, a number of shadowy figures will chase you and eventually capture you.
If you equip the Little Red Riding Hood effect and interact with the apple, you will be transported to an apple house. The inside of the house is small and has one NPC walking around. If you use the bat effect you can then fly up to a window that transports you to Jigsaw Puzzle World.
There is another entrance to the woods from the UFO. By selecting the apple option in the UFO, you will be transported to a house with heads of fairy tale characters on the wall. When you come out, you can find a tree with an apple on it. Interacting with the tree gives you the Red Riding Hood effect. Going right from the clearing with the apple tree will lead you to the main entrance(the same one accessible from Scenic Outlook) again. You will be unable to return to the apple tree clearing once you have done so. When you attempt to leave the main entrance map, the path will seem longer than usual and at the end of the path will be a number of shadowy figures waiting for you.
If you are having issues reaching the Riding Hood effect (objects are blocking your path), then you will need to download a patch that fixes this bug, or a later version of the game.