A puppet is most commonly comprised of felt and stuffing, operated through hands and wires to give the appearance of life. In Hollywood, it can be noted that what mechanisms supposedly control a puppet's functions do not actually attach to anything, such as a single arm that clearly belongs to a human being rising up from behind an obscuring surface that could not possibly conceal a human being. Attempts have been made to ascertain what is actually controlling puppets, with the prevailing theory being that they might be the appendages of some extra-dimensional godlike entity that is slithering into reality through unseen fissures in the fabric of the universe, and perhaps further investigation would be a bad idea.
For now, puppets are content to live whatever strange lives they've created for themselves with frequent bouts of spontaneous bursting into song. The majority of puppets, as best can be determined, live in Alphabet City, which is full of many doors and low walls that could conceivably be hiding a million full-time puppeteers, but which probably aren't.