Let me start by saying that to me this was the best episode following the pilot! Awake features a main character whose mental state is the ongoing theme and as the series continues we are given more and more hints about it, how Michael sees the world and how this affects his "life".
In this episode Michael had to resolve a hostage situation, dealing with a schizophrenic hostage taker. Could have been a pretty standard episode like the ones before including a case and some family drama but this time we actually see how unstable Michael is. From the beginning of the episode he first starts mixing up details of the 2 realities which in the end even lead to small (penguin) and big (Dr. Lee) hallucinations. So this is the 1st time we really see Michael understand that things he sees are not real. A major step in a possible reveal if one or both of his realities are in fact completely imagined. There was also a small scene before he lied to the schizophrenic: Michael had some sort of an enlightening moment where he also had some sort of flashes - Theraphist 1 says his wife is dead, Therapist 2 says his son is dead, we see the car crash and THEN Michael standing alone at the crash site looking down the hill where no car can be seen. Is that a (partly metaphorical) glimpse of the reality Michael got in that scene? Are his son AND wife truly dead and when he finally gets to admit this real fact, he decides to turn away from it and lie to the hostage taker - and symbollically to himself to keep going his 2 dreams?
Whatever the meaning behind it all is - there was much room for interpretation which was a key factor of the pilot being received so well. Keeping things ambiguous and allowing different interpretations is imho where this show should head to. I also hope they leave this focus on Michael's mental situation rather than the cases-of-the-weeks or even the family drama elements as long as they are not connected to Michael suppressing the reality.
In short: This episode featured great writing with some awesome ideas. If the show continues like this (weekly Fight Club anyone?) it could get very far.