Contains spoilers for this episode and earlier episodes.
Chemotherapy is underway, and Walter returns to making meth with Jesse to meet the growing expense. They agree that Walt will handle production while Jesse handles sales, with Walt insisting that there must be no more violence. Selling small quantities takes too long to produce the income he expects, so Jesse seeks a distributor through Skinny Pete. The introduction leads to Tuco Salamanca, who takes Jesse's meth and refuses to pay immediately. When Jesse protests, Tuco beats him badly enough to put him in hospital. Walt's attempt to keep the business at a safe distance has brought his partner into contact with someone prepared to use force to get what he wants.
Hank's investigation is also drawing closer. He traces the gas mask from the desert to Walt's school, where an inventory reveals missing laboratory equipment. Suspicion falls on Hugo, a janitor who has helped Walt during his treatment-related illness, and Walt watches someone else take the blame. After learning what happened to Jesse, Walt shaves his head and confronts Tuco under the name Heisenberg. He demands payment for the stolen drugs and compensation for Jesse's injuries, then triggers an explosion to demonstrate that his apparent bag of meth contains something else. Tuco pays and agrees to buy regularly, provided Walt supplies a larger weekly quantity. Walt leaves exhilarated, having secured a deal through precisely the violence he had wanted to exclude.