I actually read the side thing and now see that it says it there. We had the movie on VHS and watched it all the time while growing up.
Those poor sad children in white underpants. They're so alone.

The boy in the middle of the showy pants is totally doing the 'look at my penis!' gesture.
Looks like he's going to whip it and proudly demonstrate how he can pee without removing his underpants.
I am a mother of two boys. Yeah, they tend to do that.

Okay, I'm going to go ahead and say it. I think the luckiest kid there is the boy emerging from tree trunk. Not only has he discovered the magical land of color and undies with cartoon characters on them, it looks like he's being invited to a threesome by that biracial lesbian couple (seriously, where is Blondie's right hand?) That's either the worst daycare in the world or the best!
Aaah, I remember these! My little brother wore them when he was about three or four years old. I definitely recognise the colored waist- and leg-borders.