In this week's episode, Peter invades Lydia's dreams, insisting she throw her annual big birthday party on Wednesday, the night of the full moon. He explains if she doesn't terrible things will happen to her friends. There are also visions of worms involved to heighten the creepy factor.

Allison's grandpa informs his son now that Allison's mom has been bitten by an alpha werewolf and her scary, hairy coming out is imminent she'll have to be killed. Alison's dad seems upset, but not really appropriately upset for someone discussing his wife's disposal about ten feet away from her. Elsewhere Scott talks with Derek and accepts the fast that when killing the kanima they might not be able to save Jackson.

Driving Matt home from the rave Allison explains she and Scott are in an it's complicated stage of their relationship. He seems to talk the news in stride, but when he leaves he forgets his camera. Like the spine-tingling section of a Lifetime movie she finds a collection of pictures of herself that scream stalker. Destroying any hope that he's a shy and harmless stalker he comes back for the camera, and through a saying it all with his eyes conversation makes it clear he knows what she saw and he's not ashamed.

At the trailer Derek sets out his chains for his pack, explaining to them the painful transformation they'll go through during the full moon. Lydia comes over Allison's house the next day to try on outfits for her party, obviously trying to quell her nightmare fears with retail therapy. Allison's mom tries to get her alone to chat, probably about her impending death at the hands of one or more of her family members, but Allison shrugs her off. At Stiles' house he's back to looking at the yearbook trying to find more clues to what could link the murder victims together. His dad tells him the police have arrested Harris for the murders, but Stiles is convinced it was someone else. Looking at the yearbook together they see that all the murder victims were on the swim team, including Issac's dad who acted as the coach.

At Lydia's party Allison, Stiles, and Scott are the only guests, but Allison convinces them to call in some favors to get more people to come to give Lydia a decent birthday. Stiles is trying to convince Scott to suck it up and apologize to Allison to save their relationship when Jackson shows up and things get serious.

While the party gets into full swing, back at Allison's house her mom prepares to kill herself. With the help of her husband, just as she begins to change in the light of the full moon, she stabs herself in the heart.

At the party Allison gives Matt a chance to explain the pictures but when he gets angry and defensive she instinctively uses her werewolf killing skills and flips him to the floor. Out in the hall she has a vivid vision that she shoots herself in the chest, but after a second it passes and she's fine. Outside Stiles seems to see his dad, drunkenly ranting that he's responsible for his mother's death, but then it becomes obvious that was all in his head as well. Scott's bad trip makes him see Allison making out with Jackson, and  disturbingly continuing to be into it after he transforms into the kanima. Jackson's nightmare scape includes a faceless couple that claim to be his real parents. While it looks like the party cocktail is what's sending the party goers into a nightmare world it's obvious Beacon Hills High is in desperate need of a couple of good therapists.

The chains are proving no match for Derek's pack, who ditches them and begin to fight him viciously. But Issac has found an emotional anchor and helps Derek control the other two. Back at the party Scott begins to figure out something is going on with the visions, and after teaching teens the dangerous lesson that dunking someone's head in a pool has magical instant sobering properties, he and Stiles are on the case.

Someone tosses Matt in the pool, and when he begins to scream that he can't swim Scott and Stiles watch on, remembering whoever controls the kanima can't swim either. To confirm the suspicion as the cops break up the party Scott spots Matt with the kanima chilling by his feet like a lap dog of doom.

Just as Derek gets his pack under control Lydia shows up and blows some purple dust in his face, knocking him out cold.The episode closes with Lydia dragging Derek to the house with Peter's corpse under the floorboards. Putting his hand on the body and creating a kind of triangle of moon light Peters wakes up and, in his words, is ready to party. In other news, all parties involving Beacon Hills High students should be put on hold.