"Denno Coil" is set in a near-future world where augmented reality (AR) technology has become seamlessly integrated into everyday life. The story revolves around a group of children who navigate both the physical and digital layers of their environment, using AR glasses to interact with virtual objects and creatures. The narrative primarily follows Yuko Okonogi, a young girl who moves to Daikoku City with her family. She quickly becomes involved with a group of kids who explore the mysteries of the AR space, known as the "Denno Coil."

The AR world is populated by "illegals," unauthorized or corrupted programs that take on various forms, often resembling pets or mythical creatures. These illegals are both a source of fascination and danger, as they can disrupt the digital and physical worlds. Yuko and her friends, including Fumie, a tech-savvy girl, and Isako, a mysterious and skilled "hacker" of the AR space, investigate these anomalies while uncovering deeper secrets about the technology and its origins.

A central plot element involves the search for a legendary illegal known as "Mega-baa," a powerful and elusive entity that is said to grant wishes. As the children delve deeper into the AR world, they encounter ethical dilemmas, personal conflicts, and the consequences of blurring the lines between reality and virtuality. The story also explores themes of loss, memory, and the impact of technology on human relationships, particularly through the character of Isako, who harbors a tragic connection to the AR space.

The narrative is driven by a blend of mystery, adventure, and emotional depth, as the children confront both external threats and internal struggles. The series balances episodic explorations of the AR world with an overarching plot that gradually reveals the true nature of the technology and its effects on the characters' lives. Through its intricate storytelling and well-developed characters, "Denno Coil" presents a thought-provoking examination of a world where the boundaries between the real and the virtual are increasingly indistinct.