I watched this as a little girl and loved it. Then I bought it on DVD for my children. They love it too. Be prepared for wonderful, old-school green screen technology. The acting is cheesy, but kids love it. The dancing and singing is so fun that we usually get up and dance and sing along while watching. Educationally, this teaches rhyming, recognizing word sounds and patterns. If you let your kids dance, they will learn large motor skills and coordination.
I have lent it to my sister first so that her kids can watch it. She says they were standing in line by the "fence" alongside the computer, and just stared and stayed glued there. And my 2-year-old niece asks for it again and again.