It puzzles me that people hates this movie so much, it's a fun and enjoyable Alien / Predator rip-off with no intentions of being a masterpiece. Look, if you want to see Predator, go and see Predator and not Xtro III. It's as stupid as renting Battle Beyond The Stars and expecting Star Wars!
Anyway, a group of marines is stranded on a remote island together with a mean and nasty 2-foot tall alien whose favourite pastime is dissecting humans. The little sneaky alien has some kind of slime that he traps unknowingly B-actors in and he gets invisible as well.
OK, it isn't much of a story but Xtro III has nice effects and is surprisingly gory at times.