"Peak Performance" not only titles the episode, it describes the writers. Here we have an episode in which the writers premise was, "How can we create character development and interplay while providing a stable realistic plot in which the users can grab hold to." The writers nailed this one. I would argue the best aspect of TNG how the group as a whole deals with the mystery of space, not the individual characters themselves while many of our favorite episodes are "Data" episodes or "Worf" episodes. I will divulge the plot and character interplay next.
We start off introduced to Sima Kolrami (who apparently won the biggest douche in the universe award back in 1989 [South Park Aluusion!]) and he is on the Enterprise to treat the crew to combat testing. The Enterprise led by Picard is to be pit against the defunct Hathaway which Commander Riker captains. Riker prepares his team including Worf, Geordi, and Wesley to attempt to beat the odds by devising various tricky tactics to throw the Enterprise off guard. Meanwhile, Pulaski pushes Data into playing stratagema (sp)with the grandmaster champ Kolrami. Data struggles with his loss against Kolrami feeling inadequate to continue to serve, but Picard quickly gives Data the proverbial pounce needed to get Data back in "gear". The fight commences between The Enterprise and The Hathaway and we instantly see the fruits of Riker and his team's effort in tricking the Enterprise with a Romulan Ruse. Soon after, a very real Ferengi vessel approaches and threatens to steal the Hathaway and all her crew while the Enterprise is rendered helpless due to the state of the battle simulation. The Enterprise crew as a whole develop a ruse of their own to trick the Ferengi; Picard bluffs the destruction of the Hathaway while Riker and Worf create a fake Federation ship to save the day. Kolrami, having realized his failed philosophy, graciously congratulates Picard and Riker to whom he largely disrespected, and he proceeds to ultimate frustration in a stalemate at stratagema with Data. He got bust up! I'm surprised Kolrami didn't just join the Ferengi earlier...
The ultimate success of this episode is balanced character development. Riker is for the first time put to the test as a captain and proves his capabilities, Wesley finally does something important, and Data realizes that being perfect and correct does not always amount to success. We see this at the final stratagema scene with Data's "victory". He even cracks a smirk. We know the human is in there somewhere. The interactions between Picard and Riker, Picard and Data, Riker and Worf, and so on help to build that sense of family on The Enterprise which we come to love. It's the family we so want to be a part of, but all we can do is watch.
I hope you enjoyed this review and the episode! Think critically about every episode of TNG...except the episode directly following this one.