The Forest Stage is located in a hole in the ground in the Lost Woods. From the entrance in Kokiri Forest, go right, left, right, left, left . Look for the hole in the clearing in the tall grass near the butterflies. Stand on the platform below wearing the appropriate mask and wait for the Deku Scrubs to emerge. Then talk to their leader.
The two bag upgrades
With the Skull Mask you will receive an upgrade for Deku Sticks. Get it before you sell the mask to the Skull Kid. The Mask of Truth is obtained after completing the Mask Swap episode ; it unlocks the Deku Nut upgrade on stage. Both rewards are available once each.
The other Branch Extension is sold by the Deku Scrub in the wooded area under the bridge for 40 Rupees. You can find the other Nut Extension at a merchant in Bomb Cavern in the last wooded area before Sacred Grove. With both rewards, the Branch Bag holds 30 and the Nut Bag holds 40. The remaining masks trigger different reactions and reward Rupees on the stage.