My take was that it was crafted to be optimally engaging to a child of about four years of age. With no other purpose. Maybe even semi-automatically generated. The subject matter is a common fear of children. The video does not have enough to push it quite over the edge to any horror/revulsion response. Any particular frame would not be too out of place in a children's cartoon. As an adult, it disturbs mostly when you realize what's going on behind it conceptually.
Obviously worked as intended, given how many views it got. https://www.bbc.com/news/blogs-trending-39381889
There are thousands of video variations of that theme. Someone else here mentioned people cosplaying the characters in creepy ways. I think it started there and evolved rapidly into automated production of reptile-brain trigger material.