The background begins with Lagertha walking in on Knut (Haraldson's agent on this raid, who turns out not only to be the Earl's "friend" but his half-brother) raping a Saxon woman. Lagertha tells Knut to stop - whether all Viking women were against rape of conquests or this is a special case is unclear. Knut does stop, but turns his rage on Lagertha, who narrowly escapes being raped herself and kills Knut.
Obviously, Haraldson does not take kindly to this when Ragnar's party returns. Now, Ragnar could have lied about Knut's death and attributed it to the savage attack of the Saxons which the Vikings repelled - with a brilliant shield-wall defense (better known as the Roman testudo formation) - but I guess Ragnar didn't want to lie like this in front of his men. So he lies in a different way and says he came upon Knute raping his wife and killed him. Since there was no one there other than Lagertha to contradict this account, it's a fairly good lie.
But not good enough to satisfy Haraldson, who is already out for blood when it comes to Ragnar. In a crucial moment in Ragnar's trial, Haraldson calls upon a surprise witness to the event - Rollo - who says he saw what actually happened (surprise witness indeed, because we know that Rollo wasn't there). Looks like bad news for Ragnar, since we saw Rollo just the night before smiling as Haraldson all but offered Rollo succession to the crown if Rollo would turn on his brother. But - Rollo's testimony supports Ragnar 100%. Haraldson's so surprised and unnerved by this that in a later scene he doubts the existence of the gods (though he might have always felt that way, and Rollo's unexpected support of his brother may have just brought out Haraldon's doubt).
And this is a good twist for us, because, let's face it, we don't know Rollo well enough at this point in the series to think with confidence that he would never betray his brother. To the contrary, we know he covets Lagertha, and when he tells her at the end that he testified to save not Ragnar but Lagertha, it rings true. Family first - but shield-maiden sister-in-law more than than brother in this story.
The history continues to be accurate and rewarding in Vikings, though the Saxons were known to use the shield-wall defense, too. But, hey, who's to say that Ragnar's party didn't use it in this case, and prevail so impressively in their battle by the sea.
See also Vikings ... Vikings 1.2: Lindisfarne ... Vikings 1.3: The Priest ... Vikings 1.5: Freud and Family ... Vikings 1.7: Religion and Battle ... Vikings 1.8: Sacrifice ... Vikings Season 1 Finale: Below the Ash