Have the birthday boy or girl start the game by thinking up a goofy line about Shrek, such as "Shrek and Donkey like eating waffles with Gingy and Pinocchio."
He or she should then whisper this line in the ear of the person sitting to his or her left, and so forth around the circle until everyone has heard the phrase (or some variation of it).
The last player to hear the phrase should tell everyone what they think they heard, and then the birthday child should tell everyone the original phrase. The whole group will get a good laugh from the silly transition the birthday child's phrase has undergone.
Play several rounds, letting guests take turns coming up with goofy lines about Shrek.