At the end of the last episode, Oliver was threatening his mother with an arrow. She wasn't scared into confessing everything and she also shot him in the shoulder. Oops! So Oliver escapes somehow (probably by jumping out the 50th-story window) and finds his way into Felicity Smoak's car. He doesn't go with another hilariously unconvincing story and just tells her that he's the famous vigilante. Before he falls unconscious, he convinces her to take him to his Arrowlair (an abandoned warehouse) instead of a hospital.
At the lair, she and Diggle somehow perform surgery and stabilize Oliver. Felicity noses around and decides that she totally knew it all along. When Oliver eventually wakes up, he offers her a spot on the team, even though Diggle's already locked down the valuable "sitting around the Arrowlair waiting for Oliver to need help" slot. Felicity decides she doesn't want to be part of a team that kills so many people, but she's willing to help them locate Walter.
While this is all going on, most of the episode takes place in an island flashback. Slade Wilson trains Oliver to fight with bamboo sticks, and then takes him to the airfield so he can kill someone with a machete. Oliver completely fails to do this, but it's okay because Slade kills everyone by himself. Then Oliver learns that Slade plans to bomb the whole island, so he runs back to bring Yao Fei with them. He gets captured immediately when Yao Fei wants to stay with his daughter, who's being kept as a hostage.
Oliver's about to be killed by Billy Wintergreen, who is Slade's old partner and the one who stuck a sword through Oliver. But then Slade comes back and kills Billy with a giant knife through the eye. Oliver and Slade limp away, but they've missed their chance to escape the island. And we learn that Fyers has a mysterious boss who wants something mysterious.
Oh, and Oliver has a shoulder tattoo that's just like the one on Yao Fei's daughter. That almost certainly means something, but nobody knows what.
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The official episode description says: "Oliver remembers a significant event from the island." That's quite a scoop! I'm sure it will be completely different from the other times that's happened in every episode.
The first scene is the last scene from last week: Oliver smashes into his mother's office and tells her she's failed the city. Then he shoots her desk with an arrow. He wants to know if Walter is alive and she says she doesn't know. Then he asks about "The Undertaking" and she begs him not to kill her, because she has children. Oliver promises not to hurt her, so she pulls out a gun and shoots him. Blam! Then she calls the police and while she's hiding behind her desk, Oliver has vanished. Presumably he went out that broken window.
Felicity Smoak gets into her car in an empty parking garage and Oliver is in the backseat. He takes off his hood, because it's getting pretty silly to pretend that she hasn't figured out that he's the Hood. But she hasn't, apparently, because she acts like she's just now putting it together. He wants her to take him to the Q Consolidated factory instead of a hospital and she points out that he needs a doctor, not a steelworker. She agrees.
Diggle is sitting in the Arrowlair watching the news on the computers. Then Felicity shows up, which startles him. She'd like help dragging Oliver in. So they spring into action! There are some medical doodads around, including some refrigerated blood that Oliver stored away. I'm not sure it's a good idea to pump that stuff into Oliver without warming it up first. Also, I think you probably want a trained phlebotomist on hand if you're trying to save blood for later use. Felicity thinks Oliver's in bad shape, but Diggle assures her, "He's been through a lot worse than this."
Flashback to the island. Slade is training Oliver in stick-fighting and dropping exposition about how Oliver's been here for six months. Oliver complains about how he keeps getting beat up and also that they're going to assault an airfield full of gun-toting soldiers so what's with the bamboo sticks? He's got a point. Incidentally, Oliver's voice is much higher on the island. He hasn't learned to be gruff yet! Or it might just be because he's whining. Either way, I like it more, because regular Oliver is pretty one-note. Slade hands his gun over so he can pummel Oliver and disarm him. This somehow proves the superiority of bamboo sticks over guns. Slade sternly says, "You have two choices: Escape or die. So choose!" Oliver decides he'd like to escape. There is more stick-fighting.