After losing a tough battle against Paul, Ash and his Pokémon are recovering at the Pokémon Center near Lake Acuity. Ash’s Pokémon are on the road to recovery, but Ash is still brooding over his loss. Team Rocket thinks this could be the perfect time to steal Ash’s Pikachu: why not kick a Trainer while he’s down? Ash’s friends, on the other hand, are doing their best to help out. Dawn and Piplup are planning to cheer Ash up and Brock is out by the lake, looking for Cheri Berries to help heal Ash’s Monferno. While Brock searches for berries, he sees a strange being hover over the water and then vanish.
Back at the Pokémon Center, Nurse Joy thinks the strange being was the Legendary Uxie. That makes the third mysterious lake Pokémon that Ash and his friends have spotted! And now, after a Pokémon pep talk, Ash seems cheerful again—but Dawn thinks he’s just putting on a brave front. So it’s time for Dawn’s Pokémon Circus, a show where Dawn’s Pokémon clown around and make funny faces. Sure enough, Ash starts laughing at their antics, but all laughter stops once Team Rocket takes over the stage.
After Team Rocket calls Ash a loser, they grab his Pikachu and run. Ash and his team work together to chase them down—when Seviper uses Haze, Buizel clears the smoke, then Grotle and Staraptor knock out Yanmega and Carnivine. To finish it off, Monferno uses Mach Punch to knock Team Rocket down so Pikachu can escape. As Team Rocket argues over whose bad idea this was, Ash and his team act as one to blast the three thieves into the sky. Ash is finally feeling back to his old self, and even Dawn has something to look forward to: her next Contest in Lilypad Town!
Following Ash’s Full Battleloss against Paul, Nurse Joy is working overtime to heal all of Ash's Pokémon. Dawn and Brock try to stay positive, but Ash walks outside to clear his head. Dawn, having dealt with low self-confidence once, tries to help, but Brock stops her, letting him go for now. Dawn is left wishing that she could help the injured Pokémon. Piplup notices and gets an idea. Piplup makes faces and tries to be funny, which gives Dawn the idea to create a show to cheer Ash up and she runs off to plan.
Outside, Team Rocket, still disguised as the cleanup crew, work to fix the battlefield after Ash’s match against Paul. After some deliberation, James believes Ash is most likely depressed, so Jessie plots to steal Pikachu while Ash is too sad to care.
Having finished the bandaging and with Ash's Pokémon resting, Nurse Joy and her assistants tidy things up and put the medical supplies away. When Nurse Joy compliments Brock, he replies by flirting, but Croagunk's Poison Jab causes him to halt his advance and plead with Croagunk. It works and Croagunk simply walks away. Nurse Joy notices that Monferno is recovering slower than the others and requests some Cheri Berries. As Brock searches the surrounding forest for the Berries with a bag in hand, he has trouble finding them. He reaches Lake Acuity and takes in the scenery. He then notices a ripple on the lake and spots a shadow of a Pokémon, Uxie's projected soul. Before he can run any closer to inspect it, the shadow disappears. As he wonders about what he just saw, he notices an object to his left and glances that way, finding a Cheri Berry bush. While Dawn continues to practice back at the Center, Brock has returned with the Berries, which are then mashed up, and Nurse Joy proceeds to feed Monferno. Joy smiles as Monferno quickly perks up before telling Brock they can relax now.
Meanwhile, Ash still sulks over his most recent loss to Paul, remembering how Ursaring took out half of his team, and how Monferno couldn't defeat Electabuzz despite having just evolved. He rolls over to his side and notices Pikachu standing beside him, not the least bit upset. His other Pokémon are there as well, all with bandages but are still chirpy and celebrating. However their over-enthusiasm quickly gives way to their exhaustion. Ash is slightly concerned but he starts to laugh. Ash gets his fighting spirit back, and tells his team that Paul's Pokémon are strong because he raised them to be that way, and now it's time for them to increase training by working longer and harder than ever before. He inspires his Pokémon, all rushing to give him a group hug, knocking him to the ground as everyone laughs together, reaffirming their loyalty and friendship with him. As they head back, Ash's stomach rumbles as he's forgotten to eat earlier in the day, generating another bout of laughter for the Pokémon as they continue on.
When he returns to the Center, everyone is gathered around to discuss Brock's sighting. In the Center's small library, Ash and Dawn look up the computer as Brock and Nurse Joy pour over books, having gone. Joy finds an illustration in her book of the Lake guardians and points out to Brock the one of Uxie, which is the one he saw. He remarks though that it looked like a shadow instead of a physical form. Dawn and Ash recount theirsightings of Mesprit and Azelf. Joy reads that the legend says that all three Pokémon originated from the same Egg. Uxie, Mesprit and Azelf are beings that symbolize specific traits that just happens to correspond to Brock, Dawn and Ash respectively: Wisdom, Emotion, and Willpower. The three Pokémon are said to balance Sinnoh, and Brock wonders if their sightings are more than coincidence.
Later Ash and the others gather to watch Dawn's show in the lobby. Nurse Joy mentioning that Dawn prepared it mainly to cheer up Ash and his Pokémon. Dawn has her Pokémon pull funny faces and pose for a comedic routine. Though the laughs stops when Team Rocket arrives. Still thinking Ash is upset, Team Rocket proceeds to indirectly insult Ash and rub in his loss. It doesn't have any effect, so Meowth launches an electric-proof net and catches Pikachu. Team Rocket removes their disguises and recites their motto before proceeding to flee. Ash and his friends chase after the trio, so Jessie has her Seviper launch Haze, but Buizel's Water Pulse negates it. Pikachu tries a Thunderbolt, but the net absorbs it. Ash has Gliscor stop them with Sand-Attack, though Jessie's Yanmega knocks it back with a SonicBoom. James has Carnivine launch a Bullet Seed, but Staraptor's Aerial Ace and Grotle's Energy Ballknocks out both Yanmega and Carnivine, much to Team Rocket's shock. Monferno follows up with Mach Punch to knock Team Rocket away and free Pikachu from the net. Pikachu rejoins Ash and the others as Team Rocket notices that their plan backfired. While Team Rocket argue among themselves, Ash excitedly orders his Pokémon to execute a group attack which sends the trio blasting off. Ash and his Pokémon celebrate the victory as everyone else notices that Ash is back on track. Dawn decides to plan for her next Pokémon Contest as Nurse Joy mentions that the Lilypad Town Contest is a short time away. Back at the Center, Joy gives the group southwards directions and offers them a meal before they set off.
In the original, Jessie changes two Japanese proverbs into Pokémon form when talking about how they should try to steal Ash's Pokémon now that he's feeling down from his loss: 弱り目に祟りメノクラゲ (roughly "When it rains, it pours Tentacools"), and 泣き面にスピアー ("Beedrills to a tearful face"; meaning "adding insult to injury").
In the original, Jessie and Meowth use untranslatable wordplay. Jessie says to Ash “Whether you believe it or don’t believe it is your problem, but in the end, whoever believes it will be saved!” Believe in Japanese is “しんじる (shinjiru)”, and Jessie, to make fun of Ash for his loss to Paul, puts emphasis on the “shinji” parts (Paul’s name in Japanese is “シンジ (Shinji)”). Meowth then says “As a bonus”. Bonus in Japanese is “おまけ (omake)”, and Meowth, to insult Ash even further, puts emphasis on the “make” part, which means “lose” in Japanese. In the dub, Jessie repeatedly tells Ash that he stinks and is a loser, and Meowth simply says “check this”.
Monferno's ears are the wrong color in one scene at the Pokémon Center; they are the color of a Chimchar's ears.
When Team Rocket interrupts Dawn's circus, Mamoswine is behind them onstage. During Team Rocket's motto, Mamoswine is standing beside the stage, watching Team Rocket.
During the scene where Ash and his Pokémon were striking poses just before the group attacks, the bandage on Gliscor's right ear is missing.
After Brock tells his Croagunk to stop using Poison Jab and convinces him that he was just helping Nurse Joy out, Croagunk's Japanese voice can be heard.