On the hottest day of the summer, Harry Potter lies in a flowerbed under the living room window of Number 4, Privet Drive. He wants to watch the news, but his Uncle Vernon won't let him. He listens to Vernon and Aunt Petunia talk about their son Dudley, who's out with his friends vandalizing the park or beating up kids. The news begins and Harry breathes a sigh of relief: if the top story is a baggage handlers' strike, he thinks, things are going okay in the Wizarding world. At this point, Harry hears a loud crack and leaps to his feet, taking out his wand. He hits his head on the open window, making Petunia scream.
Readers familiar with the series will know that only a month before this, Harry witnessed Voldemort's return and one of his classmates murdered. It's telling, then, that he's working so hard to get Muggle news, as it suggests that Harry is cut off from the Wizarding world and is reduced to lying in flowerbeds in the hope that if anything bad happens, it'll be bad enough to make the Muggle news. The fact that he hits his head also emphasizes that he’s grown taller.
As Harry tries to find the source of the noise, Vernon leans out the window and grabs Harry around the neck. He hisses for Harry to put his wand away and lets Harry go with a yelp as Harry's head throbs. Vernon greets the curious neighbors and then accuses Harry of making noise and "lurking." They don't believe that Harry wants to hear the news, since Harry is receiving news from owls. Harry truthfully says he's not getting news from the owls, and when Petunia and Vernon say they're not stupid, Harry snaps, calls them stupid, and walks away. He thinks that the cracking sound he heard was someone Apparating or Disapparating, but wonders if he's overreacting to an ordinary noise out of a desire to have contact with the Wizarding world.
Notice that Harry is already beginning to question his reality (when he wonders if what he knows is the sound of Apparation is actually something else). Importantly, he wonders this because of his sense of estrangement from the Wizarding world. This kind of isolation leads Harry to doubt his own lived experience, without anyone else to confirm and support him.
Harry thinks that in the morning, he'll get the Daily Prophet—but he no longer even reads it, as news of Voldemort would make the front page. He might receive letters from Ron and Hermione, but they can't give him details about anything. Harry angrily threw away their birthday presents because of this. He spends much of his time fuming that he's stuck in Privet Drive when he was the one who saw Cedric murdered and Voldemort return. Harry thinks that Sirius is the only one who seems to understand how he's feeling, but Sirius doesn't give him any news either.
Harry believes that Voldemort's return to power will mean that things will start going wrong in big, noticeable ways. The novel will later show that this is a product of Harry's youth; he doesn't yet understand that war can be conducted quietly and under the noses of one's enemy, and Voldemort is taking advantage of the fact that hardly anyone believes he’s returned.
As Harry makes his way to the playground, he congratulates himself for behaving—he hasn't struck out for the Weasleys' home yet. He feels he has nothing to look forward to. When he doesn't dream of Cedric dying, he dreams of dark corridors with locked doors. Harry's anger rises again, and he rages to himself that if it weren't for him, nobody would know that Voldemort is back.
Again, Harry's anger here can be attributed to the fact that he's been alone in the Muggle world with no meaningful interaction with Wizards for a month. After the trauma he experienced in the previous book, Harry's poor emotional state is understandable and shows that he needs connection in order to start to recover.
When it starts to get dark, Harry looks up and sees Dudley and his gang walking by, singing a crude song. In the last year, Dudley has gone from obese to a massive but fit boxer. Harry hopes that Dudley's friends will see him and come to torment him, as Dudley is terrified to pester Harry, but the boys don't see him. After they turn the corner, Harry gets up to follow Dudley home. Harry waits in a shadow and listens to Dudley's friends talking about beating up a kid and then runs up behind Dudley after the group separates. Harry walks with him and brightly taunts Dudley about his weight and intellect. Dudley fires back that Harry isn't brave at night and teases Harry about his "boyfriend," Cedric.
Dudley's homophobic taunt about Cedric being Harry's boyfriend suggests that even being at Privet Drive with his aunt, uncle, and cousin is something of a traumatic experience for Harry, especially given that Vernon also tried to strangle Harry for surprising him. This is, again, made worse by the fact that Harry doesn't feel he can talk to these people, which means that he's experiencing more abuse on top of more silence.
Fuming, Harry points his wand at Dudley and backs him up against a wall. Suddenly, Dudley shudders and gasps, and it becomes dark and very cold. Harry snaps at Dudley to be quiet—he hears dementors in the alley. Dudley punches Harry out of fear and runs toward the dementors. Harry finds his wand, lights it, and sees a dementor leaning over Dudley. Harry conjures his Patronus, and the giant silver stag chases down the two dementors. The dementors fly away, the night returns to normal, and Mrs. Figg, the Dursleys' crazy old neighbor, races toward the boys. She shrieks for Harry to keep his wand out and says that she's going to kill Mundungus Fletcher.
Harry's ability to save himself and Dudley from the dementors speaks to the effectiveness of the educational experiences he's already had. This offers an example of what's "right" in terms of Wizarding education from previous years at Hogwarts. It's also telling that Harry saves Dudley despite their fight and Dudley's cruelty. Harry dislikes Dudley, but he still values his life and automatically moves to save him when he’s in danger.