The crew are investigating an oceanic seeding vessel called the SS Esperanto which was on the ocean planet studying the life forms which had been introduced by humans. They find 3 people aboard who committed suicide, and a haddock who did the same. Lister notices an oil covering everything and Kryten suggests that it is a hallucinogenic venom much like the oil from an octopus or squid.
He does a chemical analysis and rushes the others back to Starbug saying that the oil contains a hallucinogen which induces despair, enough to drive the crew of the Esperanto to kill themselves . They try to escape in Starbug to avoid it happening to them, but the despair squid chases them and they crash into a rock. Starbug is destroyed.
The gang wake up to find they were playing a computer game called Red Dwarf for the last four years (and they only scored 4%). Lister is the rich and successful Sebastian Doyle, Rimmer (his brother, Billy) is a bum, the Cat is the saddest geek you will ever see named Dwayne Dibley (Teeth stick out a mile, terrible taste in clothes, etc.) and Kryten is a cop named Jake Bullet.
While leaving the video game building and adjusting to all that has happened, Sebastian finds out that he is the chief of an organisation called the Ministry of Alteration which organises mass murders to purify democracy.
Bullet kills a cop while defending a young girl and they make a run for it and are chased by the fascist police. We then hear Holly trying to tell them that they're hallucinating, but they can't hear her.
In their heads they manage to escape the police and run down an alleyway. Bullet, so appalled by his actions decides to kill himself. So do Billy and Dwayne. Sebastian, despising his mass murdering life decides the same. Holly communicates to Kryten on a higher frequency and gets him to open a canister of Lithium Carbonate (a mood stabliser), which he thinks is a fire extinguisher.
The gas saves them just in time and they reflect on why they decided to kill themselves, before leaving behind the Esperanto to head back to Red Dwarf.