Peggotty and David have a long trip to Yarmouth in a cart driven by a silent man David will later learn is named Barkis. Ham is waiting for them when they arrive and greets David as an old friend before leading him and Peggotty to his uncle Mr. Peggotty's "house." In fact, the house is an abandoned and beached boat, which David finds charming and "romantic."
The men of the Peggotty family all earn their living as fishermen or boat builders, so their house is another point of connection between the family and the sea. In its makeshift quality, however, the house also mirrors the family itself, which is comprised of an uncle, an orphaned niece and nephew, and the widow of a former partner in trade. Finally, its somewhat precarious location on the beach foreshadows the events that will later overtake and break up the family.
David describes his impressions of the Peggotty home, which is clean and tidy but smells strongly of fish: Mr. Peggotty fishes for and sells lobsters, crabs, and crawfish. He also notices several pictures of biblical subjects, which he says he has "never seen since in the hands of pedlars, without seeing the whole interior of Peggotty's brother's house again, at one view." David also meets a woman and a "most beautiful" girl, who he will soon learn are Mrs. Gummidge and little Em'ly.
One aspect of David's good memory is his tendency to quickly form associations between people, places, and things. Here, he only needs to see a print like the ones at Mr. Peggotty's to visualize the whole house again. Because these associations are so vivid and immediate, they can sometimes be overpowering in their intensity and threaten David's grasp on the present. The house itself, meanwhile, is an idealized take on working-class life that associates the Peggotty's basic decency with their housekeeping: although they're poor, the Peggottys do their best to maintain a comfortable and homey atmosphere.
After the family has tea, David sits with little Em'ly on a locker (for storing sails), and pleasurably takes in the sights and sounds, including the wind howling outside and the fire burning inside. Eventually, he asks Mr. Peggotty why he named his "son" Ham, which prompts Mr. Peggotty to explain how he is related to the house's other residents. Ham and little Em'ly are his nephew and niece (by his brother and sister, respectively); both Ham and Emily are orphans, their fathers having died at sea. Mr. Peggotty also introduces his "wife" as Mrs. Gummidge but does not explain who she is. Later, however, David learns from Peggotty that Mrs. Gummidge is the widow of a former partner of Mr. Peggotty's, who now supports her.
Because the Peggottys superficially resemble a traditional nuclear family, David assumes that they are one. In reality, they are one of the many makeshift or fractured families in the novel, although it's worth noting that they seem to function well despite this. The one possible source of friction is the fact that Ham and Emily are cousins rather than siblings. In the Victorian era, this meant that a romantic relationship was possible, and the fact that Ham later desires such a relationship while Emily does not contributes to her later elopement with Steerforth.
The next morning, David and little Em'ly walk along the beach, comparing their family lives and noting the differences between them. Emily remarks that while they have both lost their fathers, there is a significant difference in class between them: David's father was a "gentleman," whereas hers was only a fisherman.
The fact that it is little Em'ly rather than David who first brings up the class difference between them is significant. Up until this point, David has led a fairly comfortable, respectable, middle-class life. Consequently, he has never needed to think about class in the way that a working-class girl like Emily has, and sees only the similarities between their situations.
Emily then fantasizes about being a lady: she would like to buy her uncle, Mr. Peggotty, an expensive outfit to repay him for his kindness. She would also like to move away from the sea, which she says frightens her. This puzzles David, because Emily seems, if anything, careless about the ocean. Emily, however, says she is only afraid of the sea when it "blows," and demonstrates her point by running out along an old jetty. The image of Emily "springing forward to her destruction" sticks in David's mind forever, and he remarks that he has sometimes thought it would have been better for her if she actually had drowned that day.
Little Em'ly's desire to be a lady leaves her vulnerable to seduction by the upper-class Steerforth: for a woman (and especially a working-class woman) there were few avenues for social advancement outside of relationships with wealthy or powerful men. Emily's ambition also marks her as suspect in a society where women were meant to be selfless, although her desire to help her family tempers this slightly. Regardless, seems to drive Emily is a need to escape the precariousness of working-class existence, as symbolized by the sea. Ultimately, however, she only succeeds in trading the uncertainties of working-class life for the uncertainties of life as a mistress, and this passage foreshadows the self-destructiveness of her actions with the image of her running out along the unstable jetty.
As the days go by, David and little Em'ly develop a youthful (though "pure" and "disinterested") infatuation with one another. Their class differences do not matter to them, because they "[make] no more provision for growing older, than [they] do for growing younger."
David's childhood romance with Emily illustrates the novel's complex relationship with the past. On the one hand, David explicitly indicates that the relationship isn't one that could last, because neither David nor Emily are thinking of the future. In a way, however, this total absorption in the moment is what gives the relationship its "purity," and there's a hint of regret that this kind of purity can't carry over into adulthood.
The adults find David and little Em'ly's romance charming—even Mrs. Gummidge, who otherwise has a habit of complaining about everything and constantly declaring her own unhappiness. On one occasion, she attempts to pick a fight with Mr. Peggotty by complaining that she knows he was out at a public-house (tavern) to escape from her "contrairy" nature. Mr. Peggotty, however, remains calm and generous even when Mrs. Gummidge goes off announcing her intention to "die and be a riddance." He attributes her bad mood, as he always does, to grief over her husband’s passing.
The adults' reaction to David and little Em'ly once again highlights the nostalgia at work in the novel's depictions of childhood; the innocence of the children's relationship is so sweet that it even moves Mrs. Gummidge. Mrs. Gummidge's supposed grief for her husband also gently satirizes the tendency of characters like David and (later on) Mr. Wickfield, to become stuck in their recollections of the past. Although Mr. Peggotty charitably chalks up Mrs. Gummidge's behavior to memories of "the old'un," the truth is that she is simply grumpy by nature.
David spends two weeks with the Peggottys and develops a particular set of mental associations with Yarmouth—like "the bells ringing for church, [and] little Em'ly leaning on my shoulder." However, while he is distressed to leave Emily, he finds himself eager to return home to Clara as soon as he and Peggotty are on their way back to Suffolk.
Like the Rookery, Yarmouth becomes the site of some of David's most childhood memories. Also like the Rookery, it's a place that David will eventually "lose" when Steerforth runs away with little Em'ly, stripping the place of its former innocence.
When David and Peggotty arrive at the Rookery, however, it is a strange servant who opens the door. David is distressed, so Peggotty leads him into the kitchen, where she awkwardly explains that Clara is not away or dead, but that David has a new "Pa": Clara has remarried. Peggotty then leads a reluctant David inside, where he sees his mother with Mr. Murdstone. As David watches, Murdstone scolds Clara for her excited response to seeing her son. Despondently, David wanders around the rest of the house, trying "to find anything that was like itself."
Peggotty's reference to David's new "Pa" is ironic in light of the changes Murdstone brings to the Copperfield home: far from making the family more complete, his marriage to Clara makes everything about home feel alien and unfamiliar to David. Meanwhile, Mr. Murdstone's warning to Clara foreshadows the ways in which he will attempt to significantly reshape her character.