The story continues after "happily ever after," when Shrek and Fiona come back from their honeymoon, they find an invitation to a royal ball with Fiona's parents to celebrate their marriage, an event Shrek is reluctant to participate in. Fiona talks him into it, and along with Donkey, they travel to the kingdom of Far Far Away. They meet Fiona's parents, King Harold and Queen Lillian, who are surprised and repulsed by Fiona's choice of husband (particularly the King himself), since they had arranged that Prince Charming rescue her from the castle but now they see that her husband is an ogre.
At a shared meal, Shrek and Harold get into a heated argument over how Shrek and Fiona will raise their family, and Fiona, disgusted at Shrek and her father's behavior, locks herself away in her room that evening, where she meets her Fairy Godmother, who is also surprised at Fiona's new looks. King Harold is later accosted by the Fairy Godmother and Charming, her son. The two retell the Prince's adventures and how he overcame many obstacles and climbed a high tower in order to rescue Fiona, finding instead the cross-dressing wolf. They reprimand Harold for breaking an old promise that Charming would be able to marry Fiona and demand that he find a way to get rid of Shrek. During the night, Shrek secretly reads Fiona's diary and pages containing the single phrase "Mrs. Fiona Charming." Then Harold arranges for Shrek and Donkey to join him on a fictitious hunting trip, which really is a trap to lure the two into the hands of an assassin, Puss in Boots. Puss is unable to defeat Shrek and, revealing that he was paid by Harold, asks to come along as a way to make amends. The three sneak into the Fairy Godmother's potion factory and steal a "Happily Ever After" potion that Shrek believes will restore Fiona's love for him.
And that is all I am telling you folks - you will have to see the film for yourself how it ends. I love Rupert Everett's (Prince Charming) narration for the storybook prologue. And also, I think it's good sequel to go with the original film.