When they arrive, they find three ships in orbit, one of them Walker's ship, the Horatio. Picard beams down alone and meets with Walker, along with the other two ship captains. After giving Picard a memory test to ensure he's still himself, Walker says that they've noticed strange patterns of orders from Starfleet Command, but can't say anything concrete. Picard is skeptical, but agrees to watch his back and keep in touch.
Picard confides in Troi about his worries, then assigns Data (while not telling him the reason behind the assignment) to review the last six months of Starfleet orders. They begin heading back to Pacifica, but find debris in a nearby sector. There are no identifying marks, but from the size and composition of the debris, Worf concludes it can only be the Horatio, totally destroyed.
Now very suspicious, Picard mentions the conspiracy theory to Riker. Riker is skeptical, but becomes less so when Data comes in with evidence of "an uncustomary reshuffling of personnel, particularly in the command areas", which Data sees as a covert attempt to seize several sectors of Federation territory. Now quite disturbed, Picard orders the Enterprise back to Earth to check things out, and informs the rest of the crew about his suspicions.
When they arrive, the response seems quite temperate. Two admirals, Savar and Aaron, invite Picard and Riker down to dinner. The third, Gregory Quinn, asks to come up to the ship. When he arrives, he denies most of what he said back at Relva 7, making Picard certain he's been affected. Picard beams down, and Riker sees Quinn to his quarters. Quinn attacks Riker, showing incredible strength and near- invulnerability. He knocks Riker out, and even Worf shortly afterwards, before Beverly knocks him out with repeated phaser blasts. She examines him, and finds a parasitic creature has taken him over.
She informs Picard about this, who's suspicious enough already from the conversations he's had with Savar and Aaron. He goes in to dinner, where it is revealed that they've all been taken over. He tries to leave, but is caught-by Riker, whom we earlier saw sneak up on Bev. As it happens, he's only faking, and they manage to stun everyone in the room, except for Aaron, who escapes. They catch him, and follow the creature that leaves his mouth, only to find Remmick, who seems to be the leader. They kill Remmick, and the mother-creature that crawls out of his ribcage. Quinn is back to normal, and all seems well, but Data finds that Remmick sent out a homing beacon before he died...