The Horne family is eating dinner when they are interrupted by Ben's brother Jerry, who has returned from a business trip to Paris and cannot stop himself from gushing about his recent discovery of baguettes. The brothers share brie and butter baguettes while Ben tells Jerry of Laura Palmer's murder and the failure of the Ghostwood project. They decide to visit One-Eyed Jacks, a casino and brothel partly owned by Ben, across the Canada–US border, where Ben wins a coin flip to determine who will be the first to sleep with the newest prostitute.
Bobby and Mike drive into the woods to pick up a hidden delivery of cocaine but are ambushed by Leo, who demands the $10,000 the pair owe him. Bobby tries to negotiate, saying that he can only gather $5,000 now and can deliver the rest later. Leo, however, is quite adamant that they pay the full amount as soon as possible, and threatens them with a shotgun to show that he means business. Leo also hints that he suspects someone has been sleeping with his wife Shelly (much to Bobby's relief, Leo has not yet figured out who it is), then scares the pair off. When Bobby visits Shelly at her home the next day, he discovers that Leo has beaten her. He swears to her that he will kill Leo if he ever does something like that again.
Back at the hotel, Cooper receives a phone call from Deputy Hawk, who informs him that Ronette has recently quit her job at Horne's Department Store and that he saw a one-armed man at the hospital. After he hangs up, Cooper finds a mysterious note by the door to his room that reads, "Jack with One Eye."
The next morning, Cooper gathers together Sheriff Truman, Deputies Hawk and Andy, and Lucy in a forest clearing to demonstrate his unusual approach to eliminating suspects from their investigation. As each suspect's name is read from a list, Cooper throws a stone at a bottle placed 60 feet 6 inches (18.44 m) away. Each time he hits the bottle with a stone, he considers the previous name read out to be of interest to the case. The method points his suspicion at Leo and Dr. Jacoby. He also discusses the note he received about "Jack with One Eye" with Truman, who suggests that it probably refers to One-Eyed Jack's.
Audrey goes to the Double R Diner, where she talks to Donna, revealing the crush she has on Agent Cooper. She also asks if Laura ever spoke of her father, then begins to dance.
Cooper's fellow FBI agent Albert Rosenfield arrives later while Truman and Cooper review evidence. Albert quickly proves that he shares absolutely none of Cooper's love and admiration for small-town communities, and his caustic attitude and sharp tongue immediately cause friction between himself and Truman.
James and Donna discuss their new relationship and kiss passionately on Donna's sofa. Elsewhere, Leland, still mourning Laura's death, dances obsessively to swing music in his living room, sobbing and holding a portrait of Laura as he does so. He breaks open the picture's frame, cutting his hands, as Sarah screams at him to stop.
Cooper retires to bed in his hotel room and experiences a dream featuring the One-Armed Man (who identifies himself as MIKE), and a long-haired, disheveled man called BOB (unbeknownst to Cooper, the same man Sarah saw in a vision in the previous episode), whom MIKE identifies as his former partner. MIKE tells Cooper that he and BOB used to live in a room above a convenience store, but MIKE eventually met God and decided to turn against BOB by removing his own arm, which had a tattoo that connected him to BOB. BOB injects himself into the dream, vowing to Cooper that he will "kill again".
Cooper then dreams that he is older and is seated in a strange room hung with red curtains. Present in the room is also a little man in a red suit and Laura Palmer, who the little man claims is really his cousin. The older Cooper asks her if she isn't Laura Palmer, and she answers: "I feel like I know her, but sometimes my arms bend back." The little man then drops some cryptic hints to Cooper before jazzy music starts playing and he rises from his seat and starts dancing. As he does so, Laura moves over to Cooper and whispers something in his ear. Cooper wakes up with a start and calls Truman, telling him that he knows who killed Laura Palmer, but also declares that the information can wait until morning.
Tropes:
- Bunny-Ears Lawyer: While established as unconventional, Cooper didn't actually behave outside the bounds of a competent FBI agent in previous episodes. His "Tibetan investigation technique" completely blows that out of the water. Averted in the fact this technique proves to be completely worthless.
- Dramatic Irony: Leo Johnson complains to Bobby and Mike about someone sleeping with his wife, unaware it's Bobby. It also, potentially, saves Bobby's life as Leo is more focused on his wife than the money.
- Establishing Character Moment: Jerry Horne is a whirlwind of passion about Paris, food, and his out-of-town adventures. So much so that it takes about ten minutes to register he's been told his ostensible friend and coworker's daughter has been murdered.
- Heroic BSoD: Leland Palmer suffers a fairly epic one that continues for much of the season.
- Kick the Dog: Ben Horne and his brother's treatment of the prostitutes at their brothel as a kind of flavor of the month club.
- Mind Screw: Cooper's dream is one of the mind-screwiest moments in television. What's insane is it almost all becomes relevant too. At least the gum part.
- Questionable Consent: Part of what makes Ben Horne's actions towards the prostitutes at One-Eyed Jacks truly reprehensible. Because they're employees at his perfume counter, they are very likely to lose both their jobs if they don't sleep with him and other customers.
- Spanner in the Works: Bobby and Mike's plans to make a lot of money being drug dealers hits a snag with the fact Laura dies with the money in her safety deposit box. They now owe a lot of money to Leo Johnson.
- Unproblematic Prostitution: Averted, in spite of the fact that One-Eyed Jacks is a relatively high-class establishment. The latest prostitute is obviously disgusted and miserable to be in her situation.
- Wham Episode: The first episode to overtly establish the supernatural elements of the show.
