From the South Park Studios interview with Matt Stone (where users were encouraged to ask questions):
j0l0n: from Henbob -> What made you think of the canadians having
those funny head and everything is square? its brilliant! cheers
MattStone: Well the idea came to us during a trip to Toronto. That's
just the way they all look up there...
In a different interview with the same site, this was recorded:
Taison: Ghislain Deslierres asks, I want to know why all the Canadians
in South Park have such weird heads because I'm a Canadian and I'm
sure that a lot of Canadian South Park fans would also want to know
why we must have those faces? So, what's the deal with the flapping
heads and beady eyes?
Trey. Go look in the mirror.
goes into fits of laughter]
That's what, that's what you, that's what
you look like to us. Everything started because Terrance and Phillip
were characters first, and they weren't necessarily Canadian. And were
later on we were like, "They're Canadian."
Trey: But the idea with
Terrance and Phillip was, even worse animation than… South Park.
Trey: Because, t-Terrance and Phillip was our answer to- When the
show first came out, and everyone was saying, "South Park is horrible
animation, and is nothing but fart jokes." And we're like, "Nononono.
Here's horrible animation and nothing but fart jokes," right? And
that's what Terrance and Phillip was, it was our answer to that. And
then it sort of grew and and, and, at that time we thought Terrance
and Phillip were probably like, British or something, and then they
just became Canadian out of necessity.
Matt: And some grief for the…
Trey: Yeah, and then we decided that all Canadians look like that, and
that was sweet, because-
Matt: We, we loved the idea that… that,
different characters in South Park don't… look any different. Race.
Race doesn't matter.
Matt: Only nationality. So, like, a
black… American… es- essentially looks the same as a white American,
but just… different skin color.
Matt: But, um, but a
black Canadian looks like a white Canadian,
and uh he
looks totally different.
Taison: Yeah. Okay.
like, a Chinese-American looks like everybody else in South Park, with
different skin tone. The Chinese Chinese… looks like, a different, a
So there's a few reasons, but clearly comedic effect was the largest!