In the Forman driveway, Donna and Hyde are playing basketball against Fez and Eric and winning. Donna calls them losers; Eric goes to take a shot, but Donna blocks it; she and Eric banter back and forth, and Donna tells him that there's nothing that he can do to stop her from taking a shot. As she moves past him, Eric pulls her pants down; Hyde, Fez and Eric all stare at her in her huge "granny panties" and then, just in case anyone missed it, Hyde shouts out for everyone to look at her granny panties. Donna quickly pulls her pants up and runs off.
[Scene change: Jackie jumps in the air.]
In the Forman basement, Fez and Caroline are sitting on the sofa; she gives him some Valentine's Day candy conversation hearts. Fez reads them and agrees with them all; they say things like "sweetheart" and "be mine" and "kiss me". As he kisses her, Jackie asks if there's one there that says, "Get a room"; Fez tells her no, but there ~is~ one that says "Kiss my brown ass." Caroline leaves, telling Fez that she'll see him tonight; once she's gone, Fez points out to Jackie that he has a lady and was about to settle for her, but dodged that bullet. Kelso comes in with an article about astronauts and says that he wants to be one; Jackie tells him that to be an astronaut, you have to be not dumb. Kelso points out that that's not true, because they send monkeys up into space, but Hyde points out that monkeys are smart. Hyde then brings up Donna's granny panties, telling Kelso that he could use them as a parachute; Eric tells him to shut up and Hyde says that he won't mention it again. Donna comes in and Hyde immediately calls her "Granny Panties"; Eric apologizes to Donna; she tells him that she's okay about it and to forget it. Eric tells her that she's the coolest girl, ever.
In the Forman kitchen, Eric is making dinner for Donna; Kitty tells him that Donna will love it. He pulls the plates out of the cupboard and Kitty tells him to use the good china, as he doesn't want to mess things up by using the every day plates; Eric tells her that he can't mess it up because Donna is so cool. Kitty doesn't understand what he's talking about, so he explains, telling her about pulling Donna's pants down and how she said it was okay. Kitty is appalled, but says that Donna wouldn't say she were okay unless she were okay. Eric doesn't understand that Kitty is trying to tell him that Donna's not okay; Kitty finally tells him that all she meant was that she wanted him to have a happy Valentine's Day; Eric says that he will and Kitty replies, "I doubt that you will," as she heads to the living room to answer the door.
In the Forman living room, Kitty answers the door to find Kelso standing there with a bunch of flowers. He asks for Laurie; Kitty tells him that the flowers are a waste of money, but Kelso says that Laurie is a great girl and he really appreciates her and wanted to show that. Kitty can't believe that they're talking about the same person and checks to see if he really means Laurie Forman; Kelso tells Kitty that he thinks Laurie gets her sweetness from Kitty; again, Kitty checks to see who he's talking about.
In Laurie's bedroom, a guy comes out just as Kelso reaches the door; Kelso asks him what he's doing, and the guy says, "right, I should go out through the window." Kelso is upset and throws the flowers on the floor.
In the Forman dining room, Eric lights the candles; Kitty once again says that Donna will love it. Donna comes in and Kitty tells her that she looks lovely. Eric gives her a Valentine's Day present: sexy panties, and tells her that they're to replace the ugly ones. Donna is angry; Eric doesn't understand as he thought that she'd laugh about it, since she's okay with the whole thing. Donna tells him that he doesn't get it and leaves. As she's storming out, Eric mutters that she should explain it to him; Donna yells back that she heard that.
In the Forman kitchen, in the circle, the guys are sitting around; Eric tells them that it's all Donna's fault and he didn't make her wear big, ugly, granny panties, and besides, anyone who hangs out with this gang should know that they're going to get pantsed. Fez says he's glad that he didn't do that to Caroline, although he would if she asked, because he respects her; Hyde thinks the whole thing is funny, and tells Eric that when he suggested that it would be funny for Eric to buy Donna panties, he meant it would be funny for ~him~, and it was. Kelso is upset that Laurie cheated on him, he takes a candy heart and breaks it in half and says that's what Laurie did to him. Hyde thinks this is funny too, and says that it's a great day. Fez tells the guys that he's going to ask Caroline to go steady with him, because that's the last step before you get to do it, and he's really horny and wants to do it.
In the Pinciotti kitchen, Jackie and Donna are eating chocolates; Jackie tells Donna that Kelso cheated on her with Laurie and now Laurie has cheated on him, so there is a God and He's on her side. Donna says that Eric is just a baby and thinks that panties are funny. Jackie suggests that they go make fun of Kelso; Donna doesn't understand why Eric doesn't understand that when she said she was okay, she wasn't okay and he was supposed to kiss her butt for two weeks until she ~was~ okay.
In the Forman kitchen, Kitty and Red come in; they ask how the dinner went and Hyde tells them that Eric blew it. Kitty isn't surprised; she leaves and Red tells Eric that there's a time and place to pull down a woman's pants, and the driveway isn't it. Eric tries saying that Donna said she was okay about it, but Red tells him a story: he once scuffed one of Kitty's new shoes, and she said it was okay, but she's never worn them since and every once in a while, she takes them out of the closet and sighs, then puts them back in the closet... and that was 14 years ago. Eric asks if he and Donna will be okay, since Red and Kitty are okay about the shoes now; Red calls him naive and says that all he did was scuff Kitty's shoes, Eric pulled Donna's pants down before God and the foreign kid.
At the movie theater, Fez and Caroline are watching Play Misty For Me (1971, starring Clint Eastwood); Fez asks Caroline if she likes popcorn and she says yes; he asks if she likes candy and she says yes; he asks if she likes soda and if she'll go steady with him and she says yes. He checks to make sure that she really means yes; she does. She tells him that she's dreamed of this day since they started dating; she then says that this is her favorite movie and she's seen it 16 times; she thinks it's romantic. Fez points out that the woman in the movie is following Clint Eastwood around and threatening him; Caroline seems to think that it's romantic to do that, and that if the woman can't have him, no one can. She then tells Fez that if he ever leaves her, she'll kill him. Fez laughs, but then nervously says okay.
In the Pinciotti kitchen, Donna is still complaining about Eric; Jackie says that Kelso will expect sympathy. Kelso comes in; Jackie tells him that she heard he wanted to talk to her; Kelso tells her that Laurie hurt and betrayed him and he deserves it, Jackie shouldn't feel sorry for him, and that she trusted him, and he's sorry that he ever hurt her. Jackie asks if he's just saying this to get sex from her; Kelso says no, and that he wouldn't blame her if she never spoke to him again; he leaves. Jackie tells Donna that she's alone, but that Donna should be with Eric. Donna realizes that she really does love Eric; Jackie says that she should be with him; Donna is shocked that Jackie is thinking of others.
In the Forman kitchen, Donna comes in and tells Eric that she's not fine, and she's sorry that she didn't tell him what a bonehead he was being, but that she'll tell him in the future. Eric says that he realized that they've crossed a line in their relationship where pulling down her pants in public is no longer funny, and that point came when she started letting him pull them down in private. He asks if they're okay, and Donna says yes, laughs and then says no.
In the Forman driveway, Eric is there, wearing only his underwear and a shirt, and playing basketball. He asks Donna if they're good; she says not yet; he tells her that he's really cold, but she still won't let him put his pants on. Red comes up the driveway and tells Eric to put his pants on. Donna laughs and tells Eric that they're good now.
[End credits: In the Forman living room, Kitty comes down, sits on the sofa and puts on a pair of shoes. She looks at them mournfully, sighs, and takes them off. Red asks what's wrong; she says, "Nothing," and goes back upstairs.]