Hurley and Locke are having a little powwow in the woods. The exact words aren't so important; all you need to know is that Hurley told Locke about Charlie's dying message, and they both agreed that Jack should never have called the people on the boat. And they decide to try to convince everyone else that the boat people are not actually there to rescue them.
Hurley finds Sayid et al. standing by that part of the fuselage that fell in the middle of the jungle. (I kind of forgot about that part of the plane until this episode). Locke walks into the clearing behind Hurley, and Sayid asks him what he's doing there. Locke: "I came here for the same reason you did, to warn Jack about the people on that boat. I already gave it a shot, but I figured I might have better luck with some support." Or a bigger knife. Sayid starts to give Locke the third degree about why he blew up the sub (which, knowing Sayid, is more likely to turn into the fifth or sixth degree), when we hear whispering. The Lostaways cock their guns, but lower them when they see that it's just the rest of their tribe returning from the radio tower. There are lots of joyful reunions, and Claire looks around expectantly. Desmond starts to approach Claire, but Hurley cuts him off. Hurley lumbers up to Claire and, with a choked voice, tells her, "He's dead. Charlie's dead." They hug as everyone looks on quietly.
And we cut to the flash-forward. Hurley is enjoying some outdoor time at the nuthouse. He's painting an Eskimo and an igloo (which I only mention in case it turns out to be some crucial clue in the fifth season), when one of his fellow inmates approaches and warns him that some guy is staring at him. I guess there are chubby chasers even in the nuthouse. Hurley asks what guy; the other inmate points, and when Hurley turns to look, he sees Charlie. A very clean and well-groomed Charlie, looking kind of hot.
Charlie calmly approaches and asks Hurley not to run away. Charlie: "Don't do what you did in the store. There's no need to freak out." Hurley does freak out, telling Charlie that however crazy he might be, he knows Charlie's dead and he's not going to have an imaginary conversation. Charlie: "I am dead. But I'm also here." Hurley: "Okay, prove it." So Charlie slaps him. That is apparently enough to convince Hurley to stick around and chat. Hurley asks Charlie if he knew he was going to die when he went with Desmond, and when Charlie nods that he did, asks why Charlie didn't tell him. Charlie: "Because you would have tried to stop me, and since I was going to do it anyway, I thought I would spare you all the drama." How come nobody ever tries to spare us the drama? Charlie tells Hurley that he needs Hurley to do something for him. Hurley doesn't want to hear it, and closes his eyes so he can count to five and make Charlie disappear. He closes his eyes and counts while Charlie tells him that he knows that "they" need him. But when Hurley gets to five and opens his eyes, Charlie is gone.