Peter gets angrier and angrier as the Observer calmly explains that Peter ascribed meaning to something that was not there: "You saw what you wanted to see. You believed what you wanted to believe, because that's what your emotions do," he says. Peter, quivering in rage, says he's wrong. "A dog does not smile, no matter how many times your kind might think it does," says the Observer. Oh, now that's some bullshit right there! After explaining to Peter all the things he did wrong, the Observer cocks his head and then, after a moment, speaks. "You blame us for her death, but it is irrelevant. She was here, now she is simply not here."
Well, that's probably not the wisest thing you can say to a grieving father and Peter smacks him across the face with the butt of his pistol. "Did you feel that? She is not simply gone. She will be remembered," he spits, adding that if, on the other hand, Peter were to kill the Observer, no one would miss him. The concept of being missed is clearly confusing to the Observer and Peter says he's nothing but tech: "I would be ten times what you are if I had that tech in my head." And then, he bashes the Observer again, knocking him out.
Back at the lab, Olivia's lying on the couch, and then she looks over, sees the videotape. Slowly she gets up, and puts it in the Betamax, a thing I still can't believe Walter has.
Back in Anil's hideout, we get a point-of-view shot from the Observer, who's coming to. Peter has flipped the table around so he's horizontal, looking at the floor, while Peter picks up surgical scissors and a scalpel. "You're wrong about emotions not being real. My feelings for her are very real," Peter says. He's calmed down considerably, which is almost scarier, so maybe now's not the best time to point out the Observer didn't say emotions aren't real; he said they make humans do stupid shit.
Peter stands up and goes to work on the back of the Observer's neck with the surgical tools. Instantly, the Observer starts spasming. "Can you feel that? The pain of a piece of you being torn out? That's the pain a father feels when he loses a child," says Peter, coldly. Then, after several seconds, the Observer goes still, lifeless, blood running down his shirt collar from the back of his neck. Peter looks at the implant he's yanked from the back of the Observer's neck. It's like a little high-tech corn pick!