In this, the last of the pre-strike episodes, the last episode for five weeks, and the original halfway mark for season 4 (it is now the 8/13th mark) -- we get the story of how Michael got from the island to the mainland and then back toward the island on the freighter. Ben also tells Alex to go to the temple, where he sent the Others at the end of season 3.
The opening, with everyone in Locke's camp -- the main characters there anyway -- is one of those scenes the Lost writers keep requiring. With people on the boat, people on the coast, and people inland, everyone needs to be periodically updated about things like who sent the boat, and the faked wreckage of 815, who Ben's inside man is, what the freighter's mission is and so on. They try to add something to these scenes -- emotion, a detail like the claim that Widmore got 324 Thai bodies from a mass grave for the plane -- but they are coming so often I still get a little bored.
The structure here is, I think, new for LOST. Instead of intertwining the flashback, we get a frame story -- Michael answers Sayid's question, and we see his flashback as the answer for the middle 55 minutes or so. An oddly straightforward structure, especially after last week's fake out. Note the timing -- Michael wakes up in the hospital and there is a Christmas tree, Sayid got onto the boat on December 24th or 26th (there has been some debate about this) -- so Michael's flashback takes place in the three weeks before Sayid gets to the boat. This episode is very much about getting all the pieces in place for the finale, so if it is not the most shocking thing in the world, this is why.
Michael's flashback is not so surprising: he feels guilt over killing people, and confesses to Walt, who shuns him. It HAD to be SOMETHING since a show that tells the story of 100 days in four years cannot have any children on screen who are going to be around for any length of time. He tries to kill himself; he can't, possibly stopped my magic island forces; the Others recruit him to offer him redemption. This episode returned to a thing I quite liked that had not been mentioned in a while -- the Others consider themselves the good guys. Certainly when the guy shows up in the alley to stop Michael from killing himself, he seems like an angel in a movie -- actually he seems a lot like God in the new Holly Hunter show Grace Under Fire (where God is a badly dressed, grumpy old white guy). A while back it was explained Ethan was acting on his own orders, so I guess that explains why the Others appeared so threatening for a while, thought they still seem awfully evil a lot of the time, what with the kidnappings, manipulation, and terror. Still, I like the idea that they are good and the castaways are bad.
Michael's compromised morality is handled pretty well (though it seems kind of unfair that the Others kidnap Walt, leading him to commit murder -- the Others have no notion of entrapment, I guess): He killed two unarmed women; he was willing to just set off a bomb on a boat of people. The idea that he needs redemption, and would want it, is pretty persuasive.
And then the ending. They promised someone would die. So Rousseau and Carl it is. I would have thought she would have stayed alive for a Rousseau flashback about her crew, but as we established with Naomi in episode two of this season, dead people can have flashbacks, so maybe it is still in the works. The ending here felt a little cheap -- they just needed a shock to go out on -- but it is cheap with a kind of tradition behind it: hard-boiled detective novelist Raymond Chandler famously said in The Simple Art of Murder "The demand was for constant action; if you stopped to think you were LOST. When in doubt have a man come through a door with a gun in his hand. This could get to be pretty silly, but somehow it didn't matter." The word LOST in that sentence, not in caps in the original, seems prescient in this context. That quote really covers how LOST works, and covers the ending beat to this episode exactly.
EDIT -- as pointed out in the comments, the show I was thinking of was Saving Grace and not Grace Under Fire, which was indeed horrible.