The "reality bubble" is a type of spell that transforms a certain area and every person in it into whatever the caster of the spell desires. In effect, it is basically a localized version of the Imaginarium, although nothing within the range of the "reality bubble" can be altered by the spell caster's choosing once it has been changed into something else, and will only revert to its original appearance once the spell wears off.
Papa Smurf first used this kind of spell in "Dreamy's Pen Pals" in order to transform the Smurf Village into the Swoof Village and most of the Smurfs except for Dreamy into Swoofs. However, the "reality bubble" spell was rather complex, and Brainy, who was trying to complete the spell in time so that it could be used when Dreamy went inside his spaceship to take off for the world of the Swoofs, found the complexity of the spell to be rather intimidating, so he decided to cut corners in completing the spell.
This had the unfortunate effect of the "reality bubble" spell wearing off too soon while Dreamy was visiting the Swoofs, causing the Swoofs and the Swoof Village to revert back to their original forms. This unveiling also made Dreamy so disheartened by the realization that he had never really met the Swoofs that he held Papa Smurf at fault for ever coming up with the idea of the Swoofs in the first place.