Cersei is reminiscing at Sansa. She and Jaime looked the same when they were kids, but Jaime got to learn to kill and she had to learn to smile. See, if she were in Lancel's place she'd be out there killing people. She describes the process of marrying Robert Baratheon as being sold to some stranger like a horse, to be ridden whenever he wanted. Sansa still has some of her old naïveté, because she protests that Cersei was queen. Queen! Cersei points out that Sansa will be Joffrey's queen and there's an undertone of "...and see how you like that." Sansa seems to accept that maybe there's more to a perfect fairy-tale ending than just being queen.
Then Cersei notices Shae as someone she doesn't know. She walks over and tells Shae she's pretty. Shae performs a terrible curtsy. Cersei asks how long she's been in Sansa's service. The answer is "a few weeks." Cersei asks when Shae left Lorath, which she knows about because she recognized the accent. She had a Lorathi handmaiden herself once, but that was a noblewoman's daughter. Shae's not one of them, because she can't curtsy. Cersei continues to probe, asking when Shae came to Westeros. The answer is "ten years ago" and now Cersei wonders how someone could go from being a Lorathi commoner to working at the Red Keep in ten years without learning how to curtsy. She asks Shae to tell them a story. The story starts with "When I was 13," but before she can get any farther, something happens! Good thing for Shae, because Cersei wasn't believing a word she said.
Lancel (with a hurt shoulder, but at least he took the arrow out) bursts into the room to tell Cersei the news of the battle! The river is on fire! Hundreds of ships are burning! Maybe more! The fleet is destroyed, but the troops are outside the city walls. I guess he was roughly correct, but I don't think there were that many ships burning. Cersei wants to know where Joffrey is and when she learns that he's on the battlements with Tyrion, she wants him brought back inside at once. And by "him" I obviously mean Joffrey. She doesn't care where Tyrion is. Lancel protests that the king's presence is important for morale, but Cersei wants Joffrey taken to his chambers at once. And no, Lancel, she doesn't want him brought in this room with all the women and children. She only wants to emasculate him a little. Lancel runs away. Again Cersei sits down, has some more wine and tells Sansa that Ser Ilyn isn't really there for protection. His job is to kill the highborn ladies if it looks like they're about to be raped. He glowers at the camera. Well, he's probably glowering at Sansa, but the camera gets in the way. This guy's got a great glower.