In the jumbled timeline of the series, Puppet Master 4 falls in sometime a little after Puppet Master 2... so far. Crazy things could happen later on, I don't know. The plot of the film is a bit jumbled itself, introducing a whole new set of (boring) characters and bringing up a plot point in the backstory that has never been mentioned before. It's a nice balance between keeping the movie moving in the present day and revealing more information about the mythos.
The life-giving magic has thus far been established as Egyptian in nature, but the new information that Puppet Master 4 gives us that those same Egyptians worshipped this "demon lord" Sutekh. He's a kind of Skeletor-looking guy with glowy eyes who can talk without opening or moving his mouth, and I guess he is the one who came up with the secret formula for the reanimation potion. Had the movie made this guy the main villain instead of those two-foot high spiny demons, I think things might have been more exciting. The demons might be mean, murdering little bastards but watching three full-grown adults cower in fear of them while letting the puppets fight their battles for them was a little sad to watch.
Also new to this movie and the series is the puppet Decapitron. His name makes him sound super bad ass, and he is the only one who is able to defeat Sutekh. He puts this thing on his head that somehow channels electricity and manages to blow up the last of the minions. Also in addition to his interchangeable heads is the fact that Toulon's spirit or something can be channeled through Decapitron, as Toulon's head appears on the doll's head from time to time to talk to Rick. Blade, Tunneler, Six Shooter, Pinhead, and Jester are all present in this fourth installment, but none of them really get to do much in comparison to the earlier films. They are mostly treated like toys by Rick and his friends, although the one scene where they are playing laser tag with Rick is pretty cute. The tagline for this film was "when bad puppets go good," and really, I like them either way. When they're bad, they're fun and when they're good, they're fun. They're heroes and villains. Like the Terminator.
Puppet Master 4 is a decent entry to the series, although bringing in this whole other crazy demon element was slightly confusing for a while. Eventually it gets a little better, but it's still not up to par with its predecessor, Toulon's Revenge. Almost halfway done with the series! I'm feeling good.