The stove in The Frying Dutchman's kitchen is out of commission, so the Sea Captain tries to apologize to customers Marge and Bart with a plate of fish fingers. In an attempt to cheer them up, he tells the two dining Simpsons the story of how he got his peg-leg.
As a mere cabin boy (portrayed by Bart), he served on the ship of his captain when it was boarded by pirates one fateful day. During the commotion, the ship ends up drifting into an iceberg. As he climbs up the crow's nest to escape, a giant squid rises from the sea and grabs the mast, catching his leg in the process. The squid ends up throwing the cabin boy back to the mainland, though his leg gets snapped off in the process.
The Sea Captain finishes his story and walks off with a laugh. Marge and Bart, on the other hand, realize that he doesn't have a peg leg and that the fish fingers are not made of fish at all.