Wow. First and foremost - if you download this episode off the internet (from unofficial sources), you may miss the most important thing - the commercial. There was an actual commercial for the Hanso Organization. While it didn't reveal much, it did show a phone number:
I tried calling but wasn't able to get through (not surprising). I had mentioned a real world game and I think this must be part of it.
The episode itself was pretty intense. It focused on everyone's favorite character, Anna Lucia. We see why she left for Australia - she was a body guard for Jack's father. Jack apparently had another child and mistress out there.
Michael tells them that the Others look to be worse off than the survivors. Since Kate never talked about the costumes she found, Michael doesn't know this is a disguise. He said the Others are mostly older men and women, and he saw only two guns there. These were on guards at a hatch. Michael believes his son, and the rest of the children are there.
So the primary characters head off to get the guns from Sawyer. While there, they realize Ana has been left behind with Henry, and that she has a gun. Earlier in the episode she got into a fight with Henry.
Sorry for jumping around - but this is kind of important. Henry once again talks about the "good ones". Apparently the Others have separated each cast away into one of two groups. He also mentions the big boss. He says he is brilliant, but does not forgive mistakes, therefore he thinks that even if he is returned, he will be killed.
Anyway, back at the hatch, Michael and Ana are talking. Ana says she was not able to kill Henry, and Michael says he will do it for her.
Are you ready?
When Ana tells Michael the combination, he shoots Ana dead (yeah!). Libby walks in and she is shot dead as well. Michael opens the door and in front of Henry, he shoots himself in the arm.
I don't think Michael was crazy. He looked very upset at shooting Libby. I think the Others told him something about getting his son back if he did these things.