Press the flag, once you reach the pixelated area press X to continue through the dialogue when the encounter begins, and then it'll progress like "normal" This whole thing is meant to be silly, don't take it seriously.
Undertale for the ENCOUNTER sound as well as the Reference. Lancer's theme - Toby Fox The piano at the end - https://www.youtube.com/watch?v=MtuBrc6p78U
