Lyra and Roger each ride a young bear while Iorek runs ahead of them. Lyra thinks of the bear Søren Eisarson telling her about the negotiations with Lord Asriel. The bears generally treat prisoners well so they can use them as bargaining chips later, but Lord Asriel made the bears wary. He was haughty and imperious, and bullied Iofur into getting to choose where he was imprisoned. They allowed him to set up on a high spot and built him a house with fireplaces and windows, per his specifications. They got him the laboratory materials he asked for, and he set to work on something that terrified the Oblation Board.
Given what Søren Eisarson said about him, Lord Asriel reads as the polar opposite of Iofur: he's extremely confident in who he is and knows how to use that confidence to get whatever he wants, whereas Iofur ruled with fear and from a place of insecurity. Being a prisoner of the bears, however, likely protected Lord Asriel from the Oblation Board to a degree, given how strong the bears have historically been.
Iorek stops the march and points up a ridge to a huge building with large lit windows. They head up the final slope and into the courtyard. Lyra and Roger get down and stumble to the door. Thorold answers the door, is surprised to see Lyra, and lets Lyra and Roger in. Lord Asriel looks eager and triumphant but when he sees Lyra, he looks at her with horror and tries to send her away. Roger then steps forward and Lord Asriel's color starts to return. Lyra says that she brought him the alethiometer and introduces Roger. Lord Asriel goes outside to talk to Iorek and orders Thorold to run the children a bath and feed them.
Lyra's reception raises a number of questions regarding what exactly Lord Asriel is up to and whether or not Lyra is doing what she's supposed to do. Given Lord Asriel's history with Mrs. Coulter and his cruel streak, it's possible that he also thinks little of children who aren't Lyra—and therefore, needs a child who isn't Lyra for something sinister.
Lyra sits outside the bathroom while Roger bathes. Roger admits that he's afraid of Lord Asriel and says that it was odd how he calmed down as soon as he saw Roger. Lyra assures him that everything is fine, but Roger says that he's more afraid of Lord Asriel than of Mrs. Coulter. Lyra offers to consult the alethiometer, but Roger says he'd rather not know the future after his horrible experience with the Gobblers. After they bathe and eat, Thorold takes Roger to bed and sends Lyra to speak with Lord Asriel.
Roger believes that there's little use in knowing the future when it's going to come for him anyway—in his understanding, it's better to be surprised. Importantly, not consulting the alethiometer in this situation means that Lyra continues to move forward not knowing what she's doing, per the prophecy: learning that Roger is the sacrifice will ruin Lyra's chances of success.
Lyra sits across from Lord Asriel. They discuss that Iorek is now king and Lord Asriel wants to know why Iorek and John Faa are involved. Lyra says that first, he needs to confirm that he's her father. When he does, she reprimands him for not telling her. Lord Asriel brushes this off, but Lyra bursts out that she doesn't know why she even brought the alethiometer to Lord Asriel and put herself through so much danger only to be received like this by her own father. She declares that Lord Asriel isn't human and that she loves Iorek more than him. Lyra puts the alethiometer down and says that she's going back to the palace with Iorek to fight Mrs. Coulter and the Oblation Board, who are coming to kill them all. Lord Asriel says calmly that they won't, which perplexes Lyra.
Declaring that Lyra loves Iorek more than Lord Asriel speaks volumes about what she's learned about love, trust, and souls over the course of her journey. While Lord Asriel has never really been there for her in a meaningful way—and has lied to her—Iorek has done everything in his power to support her and keep her safe. As far as she's concerned, Iorek is a far more moral individual than Lord Asriel is because of this. This gives Lyra the sense that going forward, if she wants to earn people's trust, she'll need to emulate Iorek and not Lord Asriel.
Lord Asriel asks Lyra for her story. When she finishes, she asks him to tell her what Dust is and why it's so scary. Lord Asriel says that it’s what makes the alethiometer work, and that the Church has always been aware of it. He explains how Rusakov discovered a new elementary particle that's attracted to adults, but not children—until their dæmons settle. Because this discovery would have an impact on the church, he announced it in Geneva. The inspector suspected Dr. Rusakov of being possessed, but he wasn't lying. They then decided that, since Dust was real, it's physical evidence for original sin. Lord Asriel asks Lyra to bring him the Bible and reminds her of Adam and Eve. God told them to not eat the fruit, and before they did, they were like children and their dæmons could take any form.
Learning that Dust is physical evidence for original sin—essentially, the ability to make choices and know right from wrong—it becomes clear what the goal is in cutting children from their dæmons: it would preserve them in an innocent, childish state forever (in theory, at least). The way that the Church silenced Rusakov and his teaching shows how it will stop at nothing to control the flow of information, especially when that information could have major implications for church teachings.
Lord Asriel reads the passage of Genesis in which the serpent tempts Eve by saying that her dæmon will assume its "true form." When she and Adam eat the fruit, their dæmons settle, but they also see good and evil and feel ashamed of their nakedness. Lord Asriel closes the book and says that sin came to the world when Adam and Eve's dæmons became fixed. Lyra asks if religion isn't true in the same way that engineering or chemistry are. Lord Asriel tells her to think of it like the square root of -1: it doesn't exist, but a person can calculate things using it. He declares that Dust is proof that something happens when "innocence changed into experience." He shows her where in the Bible they got the idea to call it Dust.
Remember what the sailor Jerry said about the positive aspects of a settled dæmon: a person then will be able to learn things about their personality depending on which animal their dæmon settles on. This suggests that a major part of growing up and gaining experience, within this worldview, is coming to a better sense of self. Children, and people without original sin more broadly, don't have that sense of self that adults do, which, incidentally, would make them easier to control.
Lyra asks about the Gobblers, and Lord Asriel explains that Mrs. Coulter started the General Oblation Board. He says that it's under the Magisterium, and the Magisterium can support it until it starts to fail, at which point they can pretend it wasn't licensed. Mrs. Coulter is ambitious and alluring, so she was the perfect person to investigate Dust for the Magisterium. Lyra asks why the Church would cut children in the first place. Lord Asriel says that they've done this before, when they used to castrate boys so that they could sing treble parts their whole lives. Intercision looks gentle in comparison, even if it isn't. This is why Bolvanger is in the far North and is a secret.
By situating intercision in a greater history of abuses by the Magisterium, Lord Asriel alludes to the many ways in which the Magisterium in this world and in the reader's world have committed abuses throughout history to maintain power. Like with intercision experiments in the novel, the Catholic Church often recruited poor boys, which shows again how the church more specifically preys on vulnerable populations as it grabs power.
Lord Asriel says that intercision was Mrs. Coulter's idea; she suspected that a dæmon settling and Dust gathering were connected. In her travels, she's seen other cultures successfully separate dæmons from bodies. Lord Asriel explains that the cut also releases lots of energy, but no one else has thought to harness it. Lyra thinks it's still too cruel. She asks what Lord Asriel is doing. He says that he's after the source of Dust, which exists in the universe that they can see through the Aurora. He explains that there are many other parallel universes, and that if he can create a burst of energy and cross over into the other world, he can destroy the origin of Dust. He says he's going to destroy death itself. Then he dismisses Lyra, insisting that he doesn't need the alethiometer. Lyra wonders what the Master really wanted her to do.
Because Lyra is so fixated on finally figuring out what Dust is and on bringing the alethiometer to Lord Asriel, she misses the importance of his asides about the energy that intercision releases and what it can do. While not necessarily something that Lyra misses just because she's a child, her inability to put two and two together here means that the prophecy can continue to come true in the correct fashion: she doesn't know that she's brought Roger here for Lord Asriel to sacrifice and create this burst of energy.