Benvolio and Mercutio wonder what happened to Romeo the previous night. Benvolio mentions that Tybalt has challenged Romeo to a dual. In a display of verbal wit, Mercutio mocks Tybalt as a "Prince of Cats" (2.3.17) who follows honor to a ridiculous degree. But he admits Tybalt is a good swordsmen.
Mercutio's mockery shows similarities between Tybalt and Romeo: Romeo loves love, Tybalt loves honor. Mercutio thinks they're both fools, though he likes Romeo and hates Tybalt.
Romeo appears. Mercutio mockingly compares Rosaline to all the great heroines of classical literature. Romeo and Mercutio then engage in an epic banter match, throwing back and forth their wit and sexual double entendres. Finally, Mercutio breaks off and says in great joy, "Now art thou sociable, now art thou Romeo" (2.3.77).
This is a glimpse of who Romeo was before he became obsessed with love: a kid with a wit as quick and wicked as Mercutio's. Mercutio believes this bantering Romeo is the "true" Romeo
The Nurse appears, looking for Romeo. For fun, Mercutio compares the Nurse to a prostitute for a while, then goes off with Benvolio to get lunch.
Here's an example of casual verbal abuse of lower-classes by nobles, even if in good fun.
The Nurse threatens some dire response if Romeo means to mislead Juliet. But Romeo says that if Juliet can get to Friar Laurence's cell that afternoon, they will be married. He also plans with the Nurse to set a rope ladder to Juliet's room, so he can climb to her room for their wedding night.
The Nurse is determined to protect both Juliet's honor and her heart. Romeo shows he is honorable.