There were two main storylines in this episode. We'll start with Peggy.
The eagerly, exceedingly confident young copy writer is part of a campaign for Patio, some strange diet soda that is affiliated with Pepsi. The company wants its advertisements to be based on Ann Margaret's solo song in Bye, Bye Birdie.
This sits very well for all the men, even Don seems to approve. But Peggy doesn't get it: isn't diet soda aimed at women? Therefore, shouldn't the campaign also be aimed at women? Don says an ad that features a beautiful female does give women the message that they wanna look like that (i.e. drink diet soda).
This seems to affect Peggy, who is aware that she isn't exactly a looker. The camera catches her trying to sing and be sexy at home one evening, following by another evening in which she goes home and picks up a guy!
She doesn't sleep with him, though, because he doesn't have a condom (Peggy has learned!), but they do everything else. She then leaves awkwardly in the middle of the night.
Meanwhile, Don has his own problems at home: Betty is unhappy with the situation involving her father. His girlfriend left him and he doesn't seem right mentally. She has her brother and sister-in-law bring him over for a visit.
After going back forth with her brother about their dad's future (he wants to place him in an old folks' home), Don lays down the law; he tells William, in no uncertain terms, that Gene will be living with the Drapers.
That may be settled, but Don's professional life is not. He must deal with Roger, who is distraught over his daughter - who is getting married - showing great displeasure over Roger's new, young wife Jane.
He must also deal with a mess: the Brits had asked Don to land a new, big account: Madison Square Garden. He did so. But then word came down from above that the British firm in charge of Sterling Cooper did not think the deal was financially viable after all.
When Don asks Price, the CFO in charge of the NYC office, why they even bought Sterling Cooper, he replies: I don't know.