While the book version of Matilda is a brainy, precocious bookworm, the movie musical adds a totally new storyline about the stories she imagines. Throughout the musical, Matilda narrates a story to her friend, the librarian Mrs. Phelps, about an acrobat and an escapologist. In her story, the couple performs increasingly dangerous feats to distract from their grief over not having a child, then cancel their most dangerous performance yet when the acrobat reveals that she's pregnant.
Unfortunately, the acrobat's jealous, vicious stepsister reveals a contract that forces them to perform the stunt anyway. It almost works, until an accident at the end causes the acrobat to fall, and she only lives long enough to give birth to their daughter. Eventually, their daughter winds up being "raised" and tormented by her evil step-aunt, who, it's implied, also "got rid of" the escapologist, who was trying to rescue his daughter. At first, Matilda's story seems like a way of processing the horrible things in her own life, but it is later revealed that her story has a connection to another main character...