People on the ship were experiencing strange hallucinations caused by an unseen alien force. Episodes like this are staples of many sci-fi shows, especially the ones that take place on spaceships. Luckily, I love episodes like this. It's always fun to see exactly what each crewmember's space madness will look like.
One of the darker hallucinations came courtesy of Lt. James. It was strange to see the ep start out with a pretty rough sex scene between James and Scott. Then Scott started acting like the biggest douche in space while taking his walk of shame. I'm sure most fans of the show figured out pretty quickly that this was some sort of dream or fantasy sequence, even before James apparently "killed" Scott with a blow to the back of the head.
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