“After waiting for a response to their hails for three days, Captain Picard finds that the Ferengi have discovered the Stargazer, his old ship.”
This is a big episode for Star Trek The Next Generation lore, specifically for Picard. It introduces his old ship, the Stargazer and you get to see the Picard Maneuver, which he is famous for. It also introduced a recurring villain, DaiMon Bok.
The Ferengi, led by DaiMan Bok, return the derelict ship, Stargazer to the Enterprise, at no cost. Which surprised Bok’s first mate. Bok had stowed away a mind altering device that has been affecting Captain Picard, giving him headaches and causing something of a PTSD event regarding the past battle in caused him to abandon the Stargazer.
Bok altered the logs of the Stargazer to indicate that Picard was the one who shot first, killing the, at the time, unknown Ferengi ship, captained by Bok’s son. Eventually the Enterprise crew finds that the logs have been falsified, but not before there was an investigation.
Bok eventually ramps up the mind altering device and Picard has a full blown hallucination. He transports to the Stargazer and due to Bok, is forced to relive the event, with the Enterprise taking the place of the Ferengi ship.
Riker is forced to come up with some form of defense against the Picard Maneuver, which there was none. Eventually Data is able to give the Enterprise a 50/50 percent chance. They can hook the tractor bean on the ship, stopping it from attacking, but they have to guess which image is the real ship. It works, and Picard is able to overcome the machine and destroy it with a phaser.
In the end Picard is fine and Bok is relieved from command.
As an interesting side note there is some medical lore from this episode as well. We are told that the brain has been completely mapped and that there are no longer any unknown reasons for a headache. Which a headache is the first indication that there was something wrong with Picard and was the start of a mystery in the episode, ending with finding out he was being manipulated by Bok.