This episode is from Season 6 (#6 of 21). Season 5 ended with Buffy’s sacrifice and death in the episode, “The Gift.” Willow, who had been getting increasingly more powerful as a Wicca, called on dark powers to bring Buffy back from the grave in the first episode of Season 6. Buffy returned completely disoriented and somehow “wrong.” As it turns out, she was plucked out of a heavenly dimension, although she has so far only told Spike the truth about this. She therefore has trouble caring about or feeling anything for this reality.
Spike has been dealing since last season with his sexual desire for Buffy (so far rebuffed). Spike still has a chip in his head, which keeps him from harming humans, though he can still fight demons, including other vampires.
After Buffy’s death, Giles left to return to England but came back in the third episode once he heard about Buffy’s miraculous resurrection. Once Giles returned, Buffy allowed him to take care of all worldly matters. Buffy has, for example, been ignoring her responsibilities to Dawn.
Dawn has been dealing with the loss of her mother and the feeling that she is unimportant and not taken seriously by the troupe. (There’s also the fact that she’s the Key.) As a way to act out, she has become a kleptomaniac, and also snuck out to party on Hallowe’en (in the previous episode).
After much prevarication, Xander finally announced to the troupe that he has asked Anya to marry him.
Willow is having difficulty controlling her magic, which affects her like a drug. In the previous episode, in order to stop Tara from being angry with her for casting too much magic, Willow cast a spell to keep Tara from remembering why she’s angry. She cast the spell using by using an herb of some sort.