All of the backgrounds are computer-generated.
The second season was vastly different in format from the first. Not only was the Cat in the Hat played by a different performer, the new season was geared toward younger viewers and mainly focused on he Cat and his Little Cats A, B and C (from 'The Cat in the Hat Comes Back').
The show contains entirely original stories and scenarios, though many of the characters are taken from Dr. Seuss' books, including the Cat in the Hat, Horton the Elephant, the Grinch, Fox in Socks, Yertle the Turtle and many others.
The show was executive produced by Michael Frith, who worked on several of Seuss' books (as editor and, in one case, illustrator) before joining the Jim Henson Company.
For most Muppet productions, the generic multi-purpose puppets (which can be redressed to play multiple minor roles) are called "Whatnots." For this series, they're called "Whozits" in reference to the "Who's" who appear in 'Horton Hears a Who!' and 'How the Grinch Stole Christmas!'