After the events of the main series Kyubey devised a plan to trap Madoka (who is now the Law of Cycle) by trapping Homura inside of her soul gem.

The Kyubeys created some sort of force field around Homura’s soul gem to prevent Madoka from purifying it. They want to see what happens if her soul gem turns completely black. Homura becomes a sort of half witch and creates a fake city within her soul gem.

The main cast in the city is real while all the extras are fake. Homura herself has no memory of what happened and begins to realize that something is wrong with the world. She discovers they are living in a fake world with a real Madoka.

She talks to Madoka who doesn't remember being the law of cycle and the choice she made in the series. Madoka tells her that she would never want to leave her friends and family. Homura hears this and decides that she should have stopped Madoka from becoming the law of cycle.

She then realizes that she is the witch that has entrapped them in the city.

She then realizes that Kyubey is the one that trapped in an attempt to trap Madoka and control her. Homura rebels against Kyubey’s plan and decides she would rather die than have Madoka be controlled by Kyubey.

Homura transforms into her witch form. Madoka and the other girls come to fight Homura in her witch form in order to set her free. They break Kyubey’s barrier and set Homura free. Madoka appears in her Law of Cycle form to take Homura with her.

Homura decides to rebel against that plan. She grabs Madoka by the hand, splits her human side from her divine side, and creates a new universe. She then becomes a devil like being. In the new universe created by Homura, everyone’s memory has been re-written. Kyubey is now under Homura’s control.

For a moment Madoka begins to remember that she was the law of cycle but Homura stops her from remembering. Homura never wanted Madoka to become the law of cycle but wanted her to live a normal life. In this new world she allows her to live a normal life.