We open with Young Shawn, Young Gus and their super nerdy friend Dennis making a visit to SBPD to see Henry. They tell him they saw a weather balloon that could pass as a UFO. Henry does not believe them.
Present day, we see a lawyer, Kessler, doing some work in his home. Suddenly, the house begins to shake violently and the TV flickers. He goes for some pills but there aren't any. Just then, a co-worker named Toby arrives with more work and a refill on his pills. All of a sudden a light appears from the sky and a vessel of some sort lands on the lawn. A slender figure comes out and Toby walks towards the light as Kessler pleads with him to stay.
Lassie, Jules and Henry arrive at Kessler's place the next day. The cops immediately dismiss his theory that a UFO abducted Toby. Shawn and Gus arrive and instantly intrigued by Kessler's theory and decide to take on the case. Henry warns them that it's a bad idea, but they decide to help Kessler anyway. The guys start to analyze the property and notice signs of possible UFO activity. Kessler tells the guys that Toby's car is still there and despite being brand-new will not start.
Shawn and Gus go to visit their old nerd friend Dennis who is now athletic and married to a gorgeous woman named Molly. But the second Molly leaves, Dennis brings Shawn and Gus to a hidden room that is complete with Battlestar Galactica and Star Trek memorabilia, along with a sci-fi style computer set-up to track UFO activity. After Shawn and Gus tell Dennis about Kessler and Toby, Dennis hacks into the national weather service's computer and pulls up the satellite image from the exact moment, place and time that Toby was supposedly abducted. After seeing a weird orb-like aircraft over Kessler's house, both Shawn and Gus admit they think Toby was abducted. Gus calls Kessler to tell him they believe his story.
Shawn and Gus are called into the station and it's clear they have become a huge joke to everyone. Turns out, Kessler has a history of psychotic episodes and in the past has admitted to seeing UFOs. Toby's story is that Kessler is acting crazy because he wasn't properly taking his meds and that the firm has suspended him for a week as a result. The guys are at a loss for clues until they notice a strange marking on Toby's arm. Gus is still convinced Toby was abducted, but Shawn isn't sure.
Back at Dennis' place they analyze the signs of abduction. Shawn develpps a new theory that Toby tried to embarrass Kessler, since he has now been given all of his cases.
The guys spy on Toby outside his firm wearing sci-fi related disguises they swiped from Dennis's 'nerd closet.' Much to their surprise, Toby suddenly sprints off. Toby is able to lose them but he calls Shawn's cell phone after realizing it was them behind him. Over the phone, he admits that Kessler was telling the truth and asks them to meet him in front of a hotel in an hour. Later at the hotel, Shawn and Gus wait outside for Toby's arrival. However, Toby's body suddenly lands in front of them, apparently the result of a suicide jump from the roof. Gus points out that suicidal tendencies are a sign of abduction.
At the station, Jules tells the guys Toby wired all of his money, $500,000, to a charity just before his death. On their way out Shawn snags a few pieces of papers, one of which is the coroner's report showing that a strange object is caught inside Toby's stomach.
At the coroner's office, Woody tells the guys the object was a flash drive, but it is now in Lassie's possession. It turns out Dennis is hacking Lassie's computer to grab the flash drive at the same time Lassie is trying to extract info from the drive. The drive contains legal documents related to a textile company that was recently responsible for a major chemical spill that Kessler believed to be intentional.
Shawn and Gus go to the town where the spill occurred and find a vehicle that is a machine that sends sonic vibrations into the earth in order to find oil. From this evidence, they determine that the textile company planned a purposeful chemical spill in order to drive residents away so that they can keep the oil for themselves. Then all of a sudden a bright light appears in the sky: It's a helicopter from the textile company coming to pick up Shawn and Gus. In the chopper, Shawn tells them what he thinks their evil plan is: With Kessler on their heels, they paid Toby to help discredit Kessler. Toby began having second thoughts and they killed him. When it appears the guys are about to be shot, Dennis comes into the room pretending to be a delivery guy. Suddenly, he pulls out nunchucks and tries to disarm the guards in order to save Shawn and Gus. Just then Jules and Lassie burst into the room and take the bad guys down.
Shawn and Gus are then seen as heroes for bravely uncovering the conspiracy, and as a result, Henry has to reluctantly give them another job.
In the end, Molly ends up discovering that Dennis is a nerd. Fortunately for Dennis, it turns that she is a closeted nerd herself.