We present a video-based interface that allows users of all skill levels to quickly create cutout-style animations by performing the character motions. The puppeteer first creates a cast of physical puppets using paper, markers and scissors. He then physically moves these puppets to tell a story. Using an inexpensive overhead camera our system tracks the motions of the puppets and renders them on a new background while removing the puppeteer's hands. Our system runs in real-time (at 30 fps) so that the puppeteer and the audience can immediately see the animation that is created. Our system also supports a variety of constraints and effects including articulated characters, multi-track animation, scene changes, camera controls, 2 1/2-D environments, shadows, and animation cycles. Users have evaluated our system both quantitatively and qualitatively: In tests of low-level dexterity, our system has similar accuracy to a mouse interface. For simple story telling, users prefer our system over either a mouse interface or traditional puppetry. We demonstrate that even first-time users, including an eleven-year-old, can use our system to quickly turn an original story idea into an animation.