This concept is underlined later on during a counseling session with the Briggs family and Dr. Jacoby. Bobby is very defiant and angry when he is with his parents, but when Dr. Jacoby has Bobby to himself, and confronts him with the fact that Bobby cried the first time he slept with Laura, Bobby breaks down into tears again. Laura told Dr. Jacoby about that because she was seeing him in secret (as a patient). Laura was also sleeping with Dr. Jacoby (because libidos in Twin Peaks never really rest).
There are a few new characters who were introduced in the last episode that get a little more screen time and purpose here. Laura Palmer's cousin, Maddy (who looks just like Laura because they are both played by Sheryl Lee) joins with Donna and James in their investigation. The three of them remain on the case together for quite some time.
Hank Jennings is also brought into the fold. He is the ex-con husband of diner-owner Norma Jennings (who is secretly seeing Big Ed Hurley), and apparently he was Leo Johnson's boss before being locked up. So far, Leo has been the best example of a dangerous character in the show, so if he's answering to Hank, you know that Hank is bad news.
Cooper, Truman and the gang then go to interview the Log Lady about what her Log saw the night of Laura's death. They take this encounter just as seriously as the psychic sketch from Mrs. Palmer's vision in the last episode. It turns out later that they are right to treat these encounters seriously, as they all help in some way to bring them closer to the truth. Afterwards, they discover the cabin where Laura and Ronette Pulaski were taken the night Laura was killed. Clues discovered in that cabin include the bird that left bite marks on Laura, and a poker chip from One Eyed Jacks with a piece missing, which had been found in Laura's stomach.
The third act keeps up the pace set very well, but I don't want to spoil any of it. There's a payoff regarding the Packard Mill arson conspiracy, and in the final moments Shelly Johnson stands up to her deadbeat husband in a way that I won't describe, but you should definitely see. The very end of the show displays Audrey Horne also taking action on thoughts and plots she had merely dreamed about so far (concerning her infatuation with Agent Cooper), but right as Cooper is confronted with Audrey's bold move, the credits start to roll. This cliffhanger is not quite as terrifying as others used so far, but still leaves the audience wanting more.
Bottom Line: There are so many "Did that actually just happen?" moments in this episode, you might not believe there were two more left in the season. But don't worry, there are plenty more twists and turns still up ahead.
Recommendation: This episode might not make sense if you are only selectively viewing, but it does have lots of classic moments well worth watching.