The Toy Story films are legendary for being surprisingly emotionally-taxing, gut-wrenching experiences for animated films about toys voiced by Forrest Gump and Tim 'The Tool Man' Taylor. The first film dealt with the feeling of being "replaced" by someone newer, cooler, and shinier, and the value of friendship through it all. The second film focused on abandonment and loved ones moving on. And the third film....Christ, the third film had a sequence about calmly accepting the inevitability of death.
But there are even more unsettling things going on in Toy Story - things baked into the very premise of the universe. Things that reveal a much more horrifying picture than the PG-related films we've seen so far...
Let's just get this one out of the way - yes, all the toys have probably witnessed Andy's budding sexuality and probably had to sit there, totally still, as their master "debooted the snake." They've actually bore witness to everything Andy has ever done when he thought he was alone in his room - every indiscretion he thought was private was actually being constantly monitored by a legion of his mysteriously sentient toys. This isn't only horrifying for Woody and pals, but also Andy - he was having his privacy violated pretty much non-stop for his entire childhood. Everytime he thought he was alone, he was being silently spied upon by everything from his army men to his goddamn piggy bank.
The basic premise of Toy Story is that all toys have sentience - they are ALIVE, despite having no internal organs or the biology necessary for life - and have seemingly unlimited energy to boot, with no need for food or water. Which means ALL toy companies have discovered the secret to CREATING LIFE from inorganic matter, but are either unaware of their discovery or purposefully hiding it from society at large by forming a secret cabal.
Both possibilities are pretty horrifying - either the toy companies are inadvertently surrounding children across the world with secretly living, co-dependent, emotionally-needy toys, or they are AWARE of this and have all agreed to not let the public at large know about it - a conspiracy on the level of X-Files, except way creepier because these people would actually know what they're doing - and be able to cover it up for over 50 years.
Bizarrely, the toys have an enormous and innate sense of self-awareness: they are aware they are toys, designed and manufactured to be played with by children, AND that their sentience and living state is unnatural and would terrify their child-masters (and humanity in general), so they hide it by going limp and inanimate in an instant. They all perfectly understand the universe around them, and exactly how they fit into it, without needing to be taught.
Until Buzz, that is.
Let's talk about Buzz Lightyear.
For some reason, every single toy until Buzz was "born" with this awareness of what they are and what their place in the world is. The toys seem positively BAFFLED that Buzz is so deluded as to think he's the ACTUAL Buzz Lightyear. And even more strangely, Buzz - even in his deluded state - knows to go limp when humans are around. What does this mean? That he has no awareness that he's a toy, but some built-in knowledge that he must become inanimate around people? The answer is probably something that's a bit of a stretch - Buzz is the latest 'n greatest, a brand new toy that features the latest in toy technology. There's some kind of computer chip inside of him that overrides his "toy self-awareness" personality, but leaves in reflexes as to how he needs to behave. This theory is bolstered by the events of Toy Story 3, when the language is switched and his ENTIRE PERSONALITY CHANGES. The toy companies have programmed Buzz's personality - the first time they've ever done so with a toy.
The toy companies are experimenting with their Buzz Lightyear line of toys - for what purpose, though, remains to be seen. Most likely, they are working on toys that can play with kids ON THEIR OWN. With modern distractions like the internet and videogames, the toy companies in the Toy Story universe are getting nervous that their products will become obsolete - so they're rolling out something new and exciting, something kids have never seen before - a toy that can play back.
No longer will toys simply be a kid doing their voices and smashing them around while they remain inanimate and stupefied. The toys will have the personas the kids imagined for them - but it's still in the experimental phase. This is something new for the toy companies, and they don't know what the results will be, so they have not overridden Buzz's reflex to become inanimate around humans.
Eventually, though, they will. A living toy that embodies the personality it was based off of - that is the next step in toy technology.
The toys in Toy Story are all trapped in a state of arrested development - whatever "age" and level of intelligence they are created at, they are trapped for life. Big Baby in Toy Story 3 has been around for years and years and years - yet still has the communication skills and emotional maturity of a baby, while Buzz Lightyear, fresh out the box, is clearly an adult. They have pre-determined states, which they cannot grow or change, no matter what they do or how long they exist. Woody has been around since the 50s, while Buzz is essentially a an infant - yet they're on the same level in terms of maturity.
Even though they are trapped in a specific stage of life for however long a toy can be alive for, their minds are not immune to the kind of deterioration human minds experience. Woody has been around since the 50s, but has no recollection of his origins, where he came from, or how he was originally brought into this world.
The emotional state of the toys is interesting - virtually every toy seems wholly obsessed with one thing and one thing only: their relationship with "their kid." They're aware that they're toys, and how their kids VIEW their toys (as toys, not as living, breathing lifeforms), and yet they've tied their emotional well-being entirely to the whims and preferences of a child. It's ingrained deeply within them - it's in their core, and this emotionally-dependent one-way relationship motivates virtually every action they take.
Sure, Andy too has a weirdly emotional connection to his toys - even at age 18, he can barely stand to give up his piggy bank and Mr. Potato Head, but his toys are OBSESSED with him, to stalker-ish degrees (even when he abandons them for years in a dark, claustrophobic spaces).
What's even weirder is the toys relationship with one another - as the pairings of Mr. and Mrs. Potato Head, Buzz and Jessie, Woody and Bo Peep, and Barbie and Ken have shown us, TOYS GET HORNY. Toys are somehow capable of swooning attractions to other toys. They hold hands and hug each other and kiss. But...why? These kinds of emotional responses would make sense if they had any chemical reactions going on within them, or....ya know, if they had genitals. But as things stand, they can get romantic with one another, but it must remain completely platonic.
The weird part is that toys are seemingly the ONLY kind of inanimate objects that have life - there are no talking chairs or mannequins or anything else in the Toy Story universe...except Hamm. Hamm is a piggy bank - not a toy by any stretch of the imagination. How is HE alive? Was it just that he was produced by a toy company that re-used materials meant for toys on a piggy bank? Or are the toy companies expanding what they use their life-creating secrets on? What else is secretly alive in the Toy Story universe?!
Woody, Buzz, and all the rest are very fortunate toys - they all share the features of some kind of organic being, so are able to see, hear, and communicate with one another with relative ease. However, not every toy has features like "a mouth" or "eyeballs." Some toys - like individual LEGO bricks - could theoretically be alive like Woody and the gang, but have absolutely no way of communicating or acting on their own.
There's really no qualitative difference between a toy block and Rex - both have absolutely no biological basis for being alive. There's no real reason LEGO bricks or blocks wouldn't be as alive and conscious as any of the other toys we follow. The big drawback LEGOs have is that they're trapped in their bodies - potentially ETERNALLY, since we have no real reason to suspect a toy can "die" unless its body is destroyed - but can do nothing to affect the world around them. It's like being trapped in a coma from the moment of birth, except you're immortal and are aware of everything happening around you. That level of helplessness would be maddening - so odds are every seemingly inanimate toy in the world is completely insane - and rightfully so.
While there's very little concrete evidence to support this, there are theories that a garbageman viewed briefly in Toy Story 3 is actually the malicious Dr. Frankenstein-of-toys Sid from the first film. The main visual proof is that he wears a skull shirt, similar to the one Sid wore, and that the general ages seem to about match up (also, it's the same voice actor, so this is pretty certain to have been meant as a fun wink at the audience). But the behavior of the character seems to speak to it being Sid so much more than anything else.
Remember - Sid knows that toys are alive. As far as we know, he's the ONLY character in the Toy Story universe who possesses this knowledge. But what has he done with this terrible understanding after his traumatic encounter with Woody in the first movie?
He's become a garbageman - but not just any garbageman. He's a garbageman who HATES toys. And it's certain he's told his fellow garbagemen to keep an eye out for disposed of toys - and make sure they are either destroyed, or suffer enormously. He's told them toys are alive, and could turn on them at any moment.
What evidence is there for this? Think about the ultimate fate of Lotso in Toy Story 3 once he's picked up by a garbageman colleague of Sid's, who owned a Lotso as a kid. Despite his fond memories, THIS is what he does to Lotso:
This is pretty much the toy equivalent of being crucified. And it's all because Sid knows the terrible secret of toys.
That's why Sid became a garbageman - it was the most effective way to destroy and torture as many toys as possible and get away with it. He knows normally most toys would simply be left to rot in a landfill...where they could possibly escape. Sid makes sure they meet their fate in the incinerator, or are crucified as a warning to the other toys of the world.
Like, in every movie, the toys will go to the ends of the Earth to save one another to keep their weird "family" together - but in Toy Story 3, Woody's just sorta bummed that the supposed love of his life is gone. Did she simply get sold at a yard sale? Thrown away? It seems pretty unlikely they wouldn't have mounted a huge adventurous search party to bring her home...unless she was destroyed or something, and they knew that their search would be fruitless.
So yeah. Bo Peep's probably dead.