In the past, in the Enchanted Forest, Baelfire and Rumpel argue about Bae not being able to go anywhere due to Rumpelstilskin's fear that one of his many enemies might try to do his son harm. Logical, but keeping a teen boy in the house all day is bound to backfire.
Rumpel comes home to find that Bae is gone. Tracking him to a nearby village, he finds that other young boys were lured away from their homes, all following the sound of a certain Pied Piper. Hooray, another character introduced!
Boo! The Pied Piper is actually Peter Pan, and it's established that he and the Dark One have a history. Pan's flute will only draw boys who feel unloved and lost. A name is created. So, a magic fight? No. Pan tells Rumpel that all he has to do is ask Bae if he wants to go home, or come to Neverland. Pan brings up Rumpel's own feelings of abandonment and joylessness, saying that Bae feels the same way.
Taking no chances, Rumpel spirits them away, back to their home. Again, he never trusted Baw to make the right choice, and his decision drives a wedge even further between them.
A rift that continues today. In Neverland, Neal has made his way back and is on the path to rescuing Henry. That path intermingles with Rumpel, and a genuine father-son moment occurs as both men band together to fight Pan. Not that it'll last long.
First, they need a way to immobilize Pan. Rumpel's magic won't work, it seems. So, of course, squid ink to the rescue. Blowing a conch shell, Neal calls a giant squid near, then they promptly kill it and harvest its ink. Using said ink, Rumpel and Neal confront Pan after Rumpel has made all of the lost boys sleep. Neal fires an arrow, which Pan promptly catches. But the ink was on the shaft. Smart, Neal, smart. They grab Henry and go.
That was easy, but now they must talk among themselves. Pan told Neal that Rumpel was not there to rescue Henry, but to kill him. Rumpel says that he was at first, revealing the prophecy that Henry is destined to be his undoing, but that he was prepared to die to save Henry. Why don't people see that "undoing" doesn't mean killing? Anyway, Neal can't trust his pop, so he squid inks him and runs off with Henry.
Bad move. Without the Dark One's power, Pan quickly catches up and takes a still-sleeping Henry back to his camp, with the Lost Boys dragging Neal off to who-knows-where.
Meanwhile, the rescue cabal of Hook, Snow White, Prince Charming, Regina and Emma Swan are learning more about Neal as they go through his one-time cave home. They're there because Tinkerbell reminded them that they needed to have a plan on how to get off of the island once they rescued Henry -- and Neal is the only person known to have gotten away. They all think he's dead, so it's a sad affair. It'd be even sadder if Charming would share the news that he has been poisoned and that his days are numbered. Mum's the word, though. For now...
Henry, the center of all the action, had been remaining remarkably calm. The lost boys were partying around him, and even with Pan whispering in his ear, he was holding fast to the fact that his moms were coming to get him. He couldn't even hear Pan's flute, at least indicating that he hadn't lost hope. At the end of the episode, though, Henry joined in the fun, and the sounds of the flute played all around him. His lost boy conversion is pretty far along.