A pulse of energy is “attacking” Olivia. She tells Astrid and Walter about it at Walter’s lab. Walter finds a letter from Saint Claire’s Mental Hospital in Olivia’s jacket. In the letter Olivia is asked if Walter needs to go back to the mental hospital. Walter doesn’t mention it to Olivia but he is clearly anxious about it. When Olivia asks what she should do about the energy Walter remembers a child from his Cortexiphan experiments that might be ale to help; he only remembers that he was called “Subject 9”.
Olivia and Astrid go to Nina Sharp at Massive Dynamic to search the Cortexiphan paperwork for information on “Subject 9”. His name was Cameron James, but he has changed it to Mark Little, and he is staying in New York City. As Olivia is about to head out to investigate Walter is packed – sandwiches included – and ready to go with her. This is shocking to Astrid and Olivia because this version of Walter has not been outside of the lab “in three years”. After Olivia introduces herself to Mark he flees but runs into Walter in the lobby. Mark is terrified that the man who use to experiment on him as a child is there. He tells Olivia and Walter how hard it has been for him to live a normal life with the “powers” he has. He even told us beautiful about a first date, a dinner, an inappropriate joke, and metal caps being pulled from a woman’s mouth – beautiful. He remembers Olivia from the experiments as well. They tell him that they need him to help destroy the energy that has been attacking Olivia; he agrees eventually.
Walter hatches a plan that will have Mark displace the unknown energy, ultimately “killing” it. They head to a nearby power grid to begin. While there Mark implies, to Olivia, that she may be doing this to herself; a notion that she immediately denies. As the energy begins to reveal itself to the group Mark begins to try and destroy it. When it gets close to Olivia it takes the form of Peter and Olivia fires her sidearm to stop Mark. As soon as that happens Peter emerges from Reiden Lake as father and son are fishing nearby; there is an Observer there as well. Olivia tells Walter that she doesn’t think the energy was trying to hurt her.

The Observer at Reiden Lake
Broyles calls Olivia and tells her about what happened at Reiden Lake. He tells Olivia that “the man” knows all about Fringe Division and about them personally. When they get to the hospital Peter is asking to speak with Olivia by name. Walter sees that Olivia has decided not to send him back to Saint Claire’s when she leaves to speak with Peter. When Olivia walks into the room Peter is obviously relieved to see her, but when he greets her she replies “Who are you?”.
tl; dr
- Peter is back but no one knows him.
- Walter isn’t going back to Saint Claire’s (Duh!)