A philosopher named DaGoulian came up with a dubious doctrine: he believes that the only way to ensure the survival of the good is by making the world more evil. He invented a special set of drums using science and alchemy, allowing him to control a power called "skeletism". By using this power, DaGoulian reanimates the dead, raising people's skeletons from their graves and building a fearsome army to fulfill his mad plan. However, one of these skeletons had been a person of a particularly pure heart, and instead of being afflicted with the red (evil) skeletism, he is reanimated with its blue version, allowing him to retain his free will and refuse the madman's orders. DaGoulian orders his minions to get rid of this rebel, who has to fight for his life and eventually figure a way to stop the insanity.
Mr. Bones is an action game that consists of numerous stages. With the exception of a few, each stage has a different goal and introduces unique gameplay style. The stages also vary greatly in length, some being extended platform levels and others consisting of short timed sequences. Many of the stages involve avoiding hazards or enemies, as well as tasks that must be completed within a certain time limit. Mr. Bones, the skeletal protagonist of the game, usually has no offensive arsenal. When damaged, he begins to lose limbs and bones, which affects his manoeuvrability and speed; he may even end up with nothing but a head and a neck hopping on the ground.
Some of the stages are simple one-screen arcade levels, while others may deviate from the action-oriented gameplay (e.g. a stage during which the player has to combine sentences into jokes to get past guards). A few stages involve music exercises, for example a level that requires Mr. Bones to play blues guitar to impress a skeleton crowd. Another stage is a paddle game variant in which a small Mr. Bones bounces off a giant head of himself, trying to collect his own bones. In another level the hero must protect a village of tiny people against enemy assault.
The story is advanced by video cutscenes displayed between the levels. Some of these are computer-generated, while others utilize footage of live actors, or a mixture of both.