The episode opens in 1988 as little Shawn and Gus are being picked up from summer camp at Camp Tikihama. Shawn is furious with Gus because he ditched him for "golden boy Jason Cunningham" in the piniata competition. Shawn's piniata is then shown sunk down to the bottom of the lake, attached to a rock.
20 years later (present day), Annie, a camp counselor, is in her cabin on a stormy night watching a horror movie with a cold. She thinks she hears a noise and investigates, but after discovering that it was just an open window, she realizes that it was nothing. She then looks out the window and sees a mysterious figure with a potato sack over his head standing across the lake staring in at her, but she just thinks her eyes are playing tricks on her. Annie opens the refrigerator and sees a note written in blood which reads, "I see you". Annie backs up to the window when suddenly, the man she saw earlier bursts through it and attacks her just moments before the opening credits begin.
A day later, Shawn and Gus are returning to the Psych headquarters when they are stunned to be reunited with Jason Cunningham, but Shawn doesn't take it so well. After discovering that Annie is missing, Shawn and Gus agree to help Jason look for her and return to Camp Tikihama where they meet Clive, Billy and Sissi, as well as Jason in a possessed-like state. After investigating Annie's cabin, Shawn, Gus and Sissi walk to the laundry shack where they find Annie's blood-soaked PJs in the washing machine. After gathering Clive and Billy, they all go out to search for Annie, except for Shawn who stays behind and calls Juliet to come and help them.
Later on, when Juliet arrives, the others return to find that Billy is missing and Juliet tells them to all get inside as a group. Meanwhile, Lassiter is meeting with his estranged wife and later discovers that the only reason she wanted to get together with him was for him to sign their divorce papers (sadly, he does).
Back at Camp Tikihama, Jason interrupts a conversation in the main cabin, then leaves. Shawn decides to go after him while the others stay behind. As he is searching, Shawn notices that the washing machine in the laundry shack is running again and walks towards it. Inside, he finds Annie tied to a chair, supposedly strangled to death, followed by a man with a potato sack over his head carrying a machete. Shawn is chased outside of the shack and back to the main cabin where he trips and is attacked, but quickly realizes that this is all just a set-up and stops Juliet from shooting the "killer", who is revealed to be Jason. It is also revealed that Gus, Annie and Billy were all in on the plan in order to get back at Shawn for all the times he scared Gus when they were kids.
As a storm approaches, the whole gang gathers inside for a party when Shawn discovers the body of the camp's janitor, "Crazy Old Erwen" floating in the lake. Juliet tries to phone an ambulance but soon learns that all the phone lines have been knocked out, preventing her from getting a signal and all the roads have been completely blocked by fallen trees from the oncoming lightning storm.
A while later, Annie decides to go back to her cabin to take a shower while the others stay back to play a game of "Strip Crippage". After getting out, Annie notices a man with a potato sack over his head carrying an axe standing behind her, whom she mistakes for Jason, and is murdered off-screen.
Meanwhile, Shawn decides to have another look at Erwen's body after suspecting that there might just be a little more to this case than he'd originally expected. The power is then cut all throughout the camp and Billy leaves to try and fix it, but ends up being electrocuted by the killer, causing the power to come back on.
After a while of hard thinking, Shawn finally figures out that Clive is the killer and he and Juliet go out to investigate, later finding the bodies of Billy and Annie. Back at the main cabin, Gus, Sissi and Jason are interrupted by a mysterious sound. Just then, the killer appears from around the corner and charges at the trio, but Jason risks his life, charges back at him and is stabbed while Gus and Sissi escape.
Sissi runs up to Shawn and tells him that the killer was in the cabin and points over to Gus fighting him before Shawn rushes to save him, thinking Gus has lost, but it turns out he won. Shawn is attacked by Clive, who is now unmasked and furious, and just as he is about to attack Shawn with his machete, Juliet comes to the rescue and shoots Clive in the hand, knocking the machete out of his grip.
The next morning, paramedics and ambulances arrive and take Jason and Sissi to the hospital, when Gus learns that the two are actually engaged. The episode concludes with Shawn, Juliet and Gus standing by the water staring out on to the lake, relieved that their nightmare is finally over. Gus also apologizes to Shawn for ditching him with Jason 20 years prior (Shawn accepts).