The Observer-transforming chip or diode in his brain is doing its job. Peter is able to plot out futures, make subtle changes to influence them, and therein put the vicious, cold-blooded killer of Etta on a path, not of this Observer-Chief's making, but of Peter's making, and all for the purpose of Peter killing this emotionless bastard.
The problem is that, unsurprisingly, Peter's own humanity is dwindling. Walter can see with the other diode he's implanted in a dead brain that the diode is causing the cerebral part of the brain to grow, and in that process eclipse the emotional part. One weakness at this part of the story tonight is why Walter lets Peter out of the lab after Peter refuses to stop his quest. Walter has explained that the effects may soon be irreversible - why wouldn't Walter then have taken matters into his own hands, and drugged Peter with a view towards getting the implant out of his head?
Well, Olivia does make a far more satisfying vehicle to make this proposition to Peter - which does Peter ultimately prefer, revenge for Etta or Olivia's love? Olivia has an excellent episode herself, retrieving a magnet, getting captured by bounty hunters, and using one of Etta's bullets to shoot her way free. She has a great reflection/exhortation about the wondrous things she's seen, universes ripped apart, that no human should see, that rang with the authority of Bladerunner. And in the last scene, with Peter confirming that he will have The Observer just where Peter will want him tomorrow - in a one-on-one in which Peter will break his neck - Olivia puts her choice to Peter.
I must say I was happily surprised by Peter's choice. In Fringe, characters in such crucial situations often make decisions unsatisfying to the heart. Certainly Peter and Olivia have both made such painful decisions on the side of the heart being expendable, necessary to sacrifice, on behalf of a greater cosmic goal.
But, tonight, Peter goes with his heart and removes the implant. It's a decision that will make me miss Fringe ever more when it's over.
... 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