When they get to the inn, Quixote finds the arms carrier and asks him to tell his story. One day, a councillor from a nearby village (a member of local government) went looking for his missing donkey. Another councillor told him that he saw the donkey in the forest nearby and offered to help look. They walked into the forest and began braying; both were excellent brayers and gave each other many compliments. They found the donkey only after it had died, but they told everyone about their adventure and their talented braying. Soon rumor of the braying had spread to nearby towns, whose inhabitants incessantly mocked the village of the braying councillors. Finally the men of the village decided to take up arms against the town that mocked the most. The man is carrying arms to be used in the battle.
Generally, this story is a good example of the absurd, the grotesque, and the comic in the novel. It alludes to the pettiness and ridiculousness of people in charge. More particularly, it is a story about the contrast of a small world and the full world surrounding it. In the small world of the village, the braying councillors do not seem ridiculous; they simply possess an unusual talent. But the full world outside passes judgment and defines the braying as ridiculous.
Just when he finished his story, a man with a green patch on his face comes in to announce that his fortune-telling ape and his puppet show are on their way. The innkeeper tells them that the man is a famous puppeteer named Master Pedro. The man comes back with his puppets and an old ape. Quixote asks the ape to describe his future, but Master Pedro explains that the ape only answers about past and present events. Sancho asks the ape to tell him about his wife Teresa, and the ape jumps on Master Pedro’s shoulder and chatters for a while. Master Pedro kneels before Quixote and praises him for reviving knight-errantry, and tells Sancho that Teresa is carding flax (cleaning and preparing cloth for weaving) next to a jug of wine.
A puppeteer is an oft-used metaphor for a novelist, who controls invented characters from behind the scenes, and makes them move and talk almost like real people. Master Pedro has a great deal in common with the author of the histories; both tell Sancho and Quixote about their past and present.
Quixote is impressed by the ape’s skill but tells Sancho that Master Pedro must have made a deal with the devil. Quixote also asks the ape whether the events in the Cave of Montesinos were true or false. The ape chatters, and Master Pedro explains that the experience was partly true and partly false.
The stand-in for the novelist himself tells us that the most recent adventure took place in the twilight zone between truth and falsehood. But the scam artist can say this with assurance only because it is an accurate description of most events.