Power of Illusion takes place some time after the events of Epic Mickey. The evil witch, Mizrabel, and her Castle of Illusion, have been accidentally transported to the Wasteland by the wizard Yen Sid. Oswald the Lucky Rabbit contacts Mickey Mouse to tell him the castle has mysteriously arrived in Wasteland and that Minnie Mouse has been spotted inside of it. Mickey then sets off to save Minnie and the "Illusions" of other Disney characters trapped in the castle. Characters confirmed to appear in the game are Scrooge McDuck from the DuckTales franchise, Ariel, Ursula and Sebastian from The Little Mermaid, Peter Pan, Rapunzel from 2010's Tangled, Jafar from Aladdin, the Queen of Hearts from Alice in Wonderland and Gopher from the Winnie the Pooh franchise. Several in-game locations have also been revealed: Agrabah, an Aladdin themed area, King Triton's undersea kingdom, and Rapunzel's tower from Tangled.
With players taking control of Mickey Mouse, the game mixes side-scrolling gameplay from games such as Castle of Illusion with the paint and thinner mechanics from Epic Mickey. Using the 3DS touch-screen, the player will be able to bring items scattered throughout each stage into existence. How well the player traces these items will affect their performance. For example, tracing a cannon perfectly will ensure that it only harms enemies, but an imperfect cannon could be a danger to everyone in the area, including Mickey himself.
Source: Wikipedia, "Epic Mickey: Power of Illusion", available under the CC-BY-SA License.