Tree House of Horror IV: The Simpson's Halloween Special IV - S5-E5
Trivia: When Marge asks Bart to explain how scary the episode is, she mentions the "War of the Worlds" broadcast on NPR. Narrated by Orson Welles, that radio serial was so chilling, a number of listeners actually believed Earth was under attack.
Answer: Willy referred to an encounter he believed he had with actual aliens, while Wiggum thought he was referring to the arcade game.