Fiona and Sam have tracked Sonya to a facility where it appears she plans on burning all the stuff she took from Michael's loft. While she's inside, Fiona decides to tamper with the other woman's car, and very narrowly escapes. Fiona and Sam aggressively pursue Sonya, following her to the entrance of a private island. Sam decides to see if he can borrow his girlfriend's speedboat to get them a vantage point from the water.
The Boss probes Michael's relationship with Larry, wanting to know why their partnership ended. He asks Michael to discuss their last operation together, which our hero describes as a "recon mission" where he made a "tactical mistake." The Boss points out that mistakes happen all the time, so what made this one instance so severe that it split them up?
Further hallucinations show us that Michael and Larry found the contact who betrayed them, and when they determined it was too risky to breach his hiding place and extract said contact, Michael blew up the building - killing innocent people that Michael admits he "didn't care" were inside. "I never wanted that to happen again," he continues. The Boss is seemingly sympathetic to his guilt, but reiterates his desire to know all of Michael's demons, "whatever it takes to dig them out."
He goes on to say that he has to be sure Michael has let go off all his old loyalties. This generates a conversation between Michael and his dead, abusive father, who accuses him of not caring about his family. "You dedicated your entire life to that agency," snarls the senior Westen. The argument soon turns physical, but ends abruptly. Then a freaked-out Sonya comes rushing into Michael's holding cell, insisting with wide eyes that he said something bad before he passed out. She tells Michael that "he knows you betrayed us [and] he's going to kill you," and hurries to help him from the room. What is she playing at?
Sonya tells Michael that she's helping him because she owes him for getting her out of the prison, and "I pay my debts." While Sam is watching from the speedboat, he spots Sonya helping Michael across the island - but it's not going well. Michael collapses, then starts rambling about how he has to go back. Shocking everyone including Sonya, he turns around and gives himself up to The Boss's pursuing troops, who take both him and Sonya back into custody. The Boss isn't happy about the attempted escape, but decides not to shoot Michael. Sonya's satisfied about that - seems this was the plan all along. The Boss introduces himself as James, and welcomes Michael to "the family."
But wait for the last beat: while Fiona, Sam and Jesse wonder what Michael's gotten himself into, Maddie greets Michael, who's sleeping on her couch and looking worse than she's ever seen her. "What did they do to you?" she asks, and he tells her. He admits that he saw his father and realized "he was the only reason I survived."
"Psychological Warfare" boils down to essentially a two-hander. Everything and everyone else is pretty much supplemental to the scenes that take place between Michael and The Boss in that one room. You could even argue that The Boss exists merely to prompt the internal dialogue that goes on in Michael's head. The episode is pretty much an accounting of all the things that make Michael who he is, whether it's something he's done or that's been done to him - sort of the character development equivalent of a recap show, cleverly wrapped in the concept of an interrogation.
Does it work? Yes, fundamentally because Jeffrey Donovan is such a facially expressive actor. We can see exactly what emotions are being dredged up in Michael, and we believe that he really is being broken down and built back up again. From a writer's standpoint, too, this is the point in time to do an episode like this. For one, it's somewhat of a refresher for casual viewers or those who might not remember all the years of story as to who this character is and what he's been through. And since this is the last season, it's worth a pause to note his growth, and the entirety of his journey - not just what we've seen on the show. We should feel like Michael Westen has come a very long way; after all, we've invested years into him.
While some things aren't really that great (you can see Sonya's fake escape setup a mile away, especially since it's completely unconvincing beforehand that she has any real affection for Michael), those little things don't really matter. This isn't an episode about surprise or even really suspense. This is an installment about what makes this character tick, and on that level, it unequivocally succeeds.