The full story
The world after the Blip (as the snap is now called) has adjusted to the fact that half the population disappeared for five years and returned unchanged in age, while everyone else aged normally. Peter's entire class was dusted, so they are all still in high school while their former classmates are adults.
Peter wants to take a break from superhero duties. He wants to go on his class trip to Europe, tell MJ how he feels, and be a normal teenager. He ignores Nick Fury's calls and leaves the Spider-Man suit at home.
Tony Stark's death has deeply affected Peter. He encounters memorials, murals, and tributes everywhere. Everyone wants to know if Spider-Man is the "next Iron Man." Peter does not want to be the next anything.
Fury finds him in Venice as a massive water creature attacks. Quentin Beck—Mysterio—arrives to fight it. He claims to be from another Earth, brought here by dimensional rifts. The Elementals destroyed his world, and now they are here. The story is fiction.
Beck is a fraud. He was a Stark Industries engineer who invented holographic technology—BARF, the system Tony demonstrated in Civil War. Stark humiliated him and dismissed his work, and Beck has been plotting revenge ever since. The Elementals are illusions. The battles are choreographed. Everything is designed to make Mysterio appear to be Earth's greatest hero.
Peter, seeking a mentor to replace Tony, gives Beck E.D.I.T.H., an AI satellite network Tony left him. "Even Dead, I'm The Hero." It controls Stark's entire drone arsenal. Peter hands control to a supervillain because Beck made him feel inadequate.
The illusion sequences when Beck turns on Peter distort reality—Zombie Iron Man, fractured perceptions. Peter struggles to trust his own senses. Mysterio weaponizes grief and self-doubt. He nearly kills Peter with a train.
Peter rebuilds on a Stark jet, designing a new suit and stepping into his role as a hero. The final battle in London involves Peter learning to trust his Spider-Sense—his "Peter Tingle"—to see through Beck's illusions.
Beck dies but has one final plan. He edited footage to frame Spider-Man for the London attack and, in the mid-credits scene, reveals Peter Parker's identity to the entire world. J. Jonah Jameson broadcasts it.
In the post-credits scene, the Nick Fury and Maria Hill seen throughout the film are revealed to be Talos and Soren, Skrulls posing as them. The real Fury is found relaxing on what looks like a tropical beach—actually a hologram aboard a space station under construction.