Courage the Cowardly Dog is a pretty strange show. Not a whole lot of stuff that happens in the show makes any sense, even when you consider the fact that it's a cartoon. But why is that? One of the many fan theories about Courage the Cowardly Dog that sets out to explain this is from Redditor DiggaDoug492, and this user provides a pretty compelling answer: everything in the show is happening from Courage's perspective, i.e., a small, cowardly dog is seeing weird stuff go down because that's how he views the world.
In fact, there's actually quite a bit of evidence to support this theory, and SirDiego reinforces it with some salient points of his own on the same thread. What's more, the show's intro might even be able to prove this theory all on its own.
Take a look at the breakdown of this Courage the Cowardly Dog fan theory and decide for yourself.
In the show's intro, Courage sees his shadow and immediately imagines it as being a monstrous creature and runs away from it. It's, of course, just his shadow, but this fact alone shows that Courage has the predisposition to imagine monsters.
At the end of the intro, Courage's owner Eustace gets angry with him, and suddenly his head morphs into a giant green goblin-monster thing. This proves conclusively that Courage perceives anyone whom he considers to be scary as a monster. Though he doesn't normally fear Eustace, he definitely does when the old man becomes angry, hence the sudden terrifying transformation.
Because Courage is a small, cowardly dog, he is predisposed to fear any and all strangers. So, all of the villains that he encounters throughout the show are actually just normal people, but he sees them through a lens of terror, making them monstrous.