In 'Who is "Fred"? the LA Times found out' WatchingTV Online notes that at least some YouTube viral videos by "Fred" are not just the project of some little George Lucas in his parent's garage. Fred, getting 5 million views on some videos, is an amateur supported by an L.A.-based ad firm.
But to answer NewTeeVee's original question in "Who the Frack is “Fred?” ("watch his latest video and please explain what, exactly, is going on?"):
Millions of grade school kids have different sensibilities than older people. Just ask one and they'll show you many similar videos.