After Ma-Ti died and was thrown into his space, what remained of his character was transformed into the Plot Hole, largely due to how mistreated he was and the fact he never felt that he was useful. The Plot Hole was created as a result of Ma-Ti's battle with Malachite and is responsible for all the inconsistencies in the past, present and future (like Spoony and Dr. Insano being the same person in Kickassia when they are clearly different people).
After the Nostalgia Critic and the reviewers journeyed to the Plot Hole and defeated the Executor as well as his allies, the Nostalgia Critic drove in the Plot Hole and landed in the real world, where he was tested by Ma-Ti and his real life counterpart, Doug Walker.
He had the choice to leave his role and make a new life for himself, thus unfortunately destroying the world he created, or to remain as the Nostalgia Critic and accept his fate and purpose. In the end, much to Ma-Ti's shock, the Nostalgia Critic chose to remain and apologized for his actions, thus finally satisfying Ma-Ti's resentment and feelings.
After this Ma-Ti left, thus destabilizing the Plot Hole and since it couldn't be stopped, the critics enlarged it by feeding it more Plot Holes and inconsistencies in media, so that it could become the new universe.
However, to prevent the Plot Hole from destabilizing again, the Nostalgia Critic sacrificed himself by merging with it. Him being unable to grasp the concept of performing such a selfless act, the plot hole forced the Critic into a purgatory that became known as "Demo Reel", though the plot hole's inconsistent nature allowed the Critic to cameo in other reviewers' videos at the same time. After a few months, the Plot Hole decided that the Critic "needs to go back", deconstructing the "Demo Reel" world and placing the Nostalgia Critic back in the Awesomeverse. As of January 2013, Douchey McNitpick stabilizes the Plot Hole.