The specific story in episode 5.6 concerns a "pocket universe" that Walter discovered back in 2016, as our world reeled and collapsed under the Observer invasion. The pocket universe, on a floor of an apartment building, contains all sorts of goodies, including ceilings that suddenly turn into floors, and an entrance accessed by a virtual square dance. As I often noted in my reviews of Fringe in the first few years, it had a 1950s Science Fiction Theater flavor, which was well recalled tonight in the pocket universe. But that was probably the least important part of tonight's story.
More important is Peter's transformation, due to the Observer chip he embedded in his brain last week. Tonight we see that it is giving Peter some or all of the Observer powers. He recovers more quickly from blows (likely due to the chip's shunting of their impact and pain to less vulnerable parts of his body), calculates kinesthetics and distances more quickly on the move, is a more effective hand-to-hand fighter, and can move with awesome speed. The question of course now looms larger than ever of whether this transformation will undo and destroy Peter, as the Observer that Peter gets the better of darkly hints. We do need to take this with a grain of salt, since Observers can be vicious liars in their goal of undoing us.
Peter still has his redeeming humanity, at least as of the end of this episode. Walter has been acting less like Walter and more like Walternate all season. It's likely because his brain has been reconstituted to completion. John Noble does a great job portraying this. At times tonight, Walter even sounded like Walternate. But Walter is still Walter, at least insofar as his being sensitive to his own transformation, and worrying that it's turning him into something he wasn't and didn't want to be.
Peter picks some of this up, talks to Walter, and tries to reassure him that he won't let Walter turn into a a ruthless man. As part of that reassurance, Peter calls Walter, his father, "Dad".
It's a single word, but it speaks to the profound humanity of this series, and why I'm going to miss it keenly when it concludes.
... Fringe 4.2: Better and Worse Selves... Fringe 4.3: Sanity and Son ... Fringe 4.4: Peter's Back, Ectoplasm, and McLuhan ... Fringe 4.5: Double Return ... Fringe 4.6: Time Slips ... Fringe 4.7: The Invisible Man ... Fringe 4.8: The Ramifications of Transformed Alternate Realities ... Fringe 4.9: Elizabeth ... Fringe 4.10: Deceit and Future Vision ... Fringe 4.11: Alternate Astrid ... Fringe 4.12: Double Westfield / Single Olivia... Fringe 4.13: Tea and Telepathy ... Fringe 4.14: Palimpsest ... Fringe 4.15: I Knew It! ... Fringe 4.16: Walter Likes Yiddish ... Fringe 4.17: Second Chances ... Fringe 4.18: Broyled on Both Sides ... Future Fringe 4.19 ... Fringe 4.20: Bridge ... Fringe 4.21: Shocks ... Fringe Season 4 Finale: Death and Life