Clara Sutter (Noley Thornton), a young child whose father's career has moved her from ship to ship and not allowed her to have friends for any length of time, has an imaginary friend named Isabella. Counselor Troi doesn't think this is cause for alarm. But during the ship's exploration of a nebula, a mysterious alien presence probes Clara's mind and then appears physically in the form of Isabella (Shay Astar). Isabella the alien can appear and vanish at will.
What follows is predictable: Because Isabella was previously established as Clara's imaginary friend, of course all the adults are slow to believe her when Clara says that Isabella is now real, and that Isabella is doing things that she shouldn't be doing (actions which are naturally blamed on Clara). Considering all these people are in Starfleet and have seen some pretty spectacularly incredible things in the past, you wouldn't think it would be that much of a leap to consider that an alien presence could maybe appear in the form of an 11-year-old girl. But because we have a child talking to adults, it takes too long for everyone to catch on to what's going on here.
"Imaginary Friend" is tedious, obvious, and unimaginative. The episode shows us the alien presence taking Isabella's form in the opening scenes, so it certainly can't be called a mystery. The motivation of the alien presence is hard to account for, especially when it starts making threats and telling Clara that it's going to kill everyone on the ship. Naturally, Isabella's eyes glow red when she says this, because, y'know, red-glowing eyes are scary — and certainly not subtle.
Finally, after all the tedium, we get a scene where Picard talks to Isabella to try to negotiate peace with the mysterious aliens — in a scene of equal tediousness, as Picard attempts to explain the human reasons for why adults must be parents to children (which the alien has mistaken for some sort of oppression or something, hence its hostility). What isn't clear is why the alien perceives everything through the mentality of a child. Doesn't it have an intelligence of its own? Why couldn't it simply probe an adult to get an adult perspective on humanity? Such questions are almost beside the point, since the aliens are simply a means to an end — to set up simpleminded scenes involving Clara and Isabella (and the really-wearing-out-his-welcome Alexander) that mostly just sit on the screen, flail about for awhile, and then die.