Pycelle protests that he's not a spy for Cersei. Technically, he serves all of House Lannister. He's always been Tywin's man since the days of the Mad King. This does not mollify Tyrion, so he has Bronn cut off Pycelle's beard. As a side note, Pycelle denies poisoning Arryn. But he didn't save him either. Pycelle's basic defense is, "I always served Lannister." Tyrion tells Shagga and Bronn, "Throw him in one of the black cells." They drag him out. Tyrion gives the naked lady (did you forget about the naked lady?) a coin. "For your trouble." Then another one, with a nod.
Tyrion sits with Varys. We learn that Varys put Shae in Sansa's service. He asks Tyrion if, with Janos and Pycelle gone, should he be worried? Tyrion says previous small councils served Hands poorly. He's kind of cleaning house around here, isn't he? Varys has an elaborate riddle about a sellsword and three great men. You know, "There's a rich man, a holy man, a professional jazz guitarist, and a sellsword in a room. Each of the other three wants the sellsword to kill the other two. Who's got the power?" Tyrion says it's the sellsword: "He has a sword, the power of life and death." Varys questions where power really lies, because in the real world, all the power lies with royalty or jazz guitarists. Varys asks who was truly responsible for Ned dying. Joffrey? The executioner? Varys thinks power is a shadow. He works that around to a compliment: "A very small man can cast a very large shadow."
The scene now shifts to the Night's Watch recruits. Arya is sharpening her sword, because I was right about sword-sharpening being the standard thing people do to start scenes on this show. Yoren comes in and tells her she should be sleeping, because they're marching 30 miles tomorrow. She declines the gross wine he offers her. He admits, "You don't drink it for the flavor, to be honest." She asks how he sleeps, what with the horrible things he's seen. He says he's seen some pretty things, too. He says he kept Arya from seeing the execution, so she shouldn't be picturing it. But when she closes her eyes, she sees them all standing up there. Joffrey. The queen. "And my sister." Yoren says he saw his brother stabbed through the heart. By someone named "Willam," which makes me wonder if I'm supposed to be picturing the one from RuPaul's Drag Race. Yoren says the funny part is that he can't picture his brother's face anymore. But he knew Willam had nice teeth, blue eyes and a dimpled chin. He'd say Willam's name every night before he went to bed. One day, Willam came back into town and Yoren buried an ax deep into his head. Then he took Willam's horse and rode to the Wall. "That'll help you sleep, eh?"