To those unfamiliar with Fringe, this may seem like an unusual scene. But it's pretty much just Walter being Walter.
On the episode "Grey Matters," the investigation leads Peter and the team inside a mental hospital.
Peter and Olivia visit a mental asylum on the episode "Grey Matters." That's where the investigation takes them.

Fringe Season 2 Episode 10 Quotes

Are you really trying to tell us that he is one of the heads they stole? Fine. Let's say for a second you're right. Frozen heads don't just get up and walk into places. I mean, the dead don't rise out of their graves and perform midnight brain surgery.


Security Guard: Are you Dr. Bishop?
Walter: Yes. And I'm perfectly sane.