From this point on, Watson tells us, the story will be told as it was reported to Holmes himself: in letter form. Watson describes the loneliness and ancient feel of the moor. He goes on to relate the status of the escaped con, who has not been seen in two weeks. The relieved locals assume he has fled the area, since there is no food to sustain him on the moor.
Watson also alludes to a budding romantic relationship between Sir Henry and Miss Stapleton, whom he characterizes as exotic. Though Watson thinks her brother is a bit of a wet blanket by contrast, he nonetheless admits that he has hidden passions. He points out that Mr. Stapleton expresses disapproval of Sir Henry's interest in his sister.
Watson goes on to relate his meeting with another neighbor, Mr. Frankland of Lafter Hall. Mr. Frankland is a good-natured if quarrelsome man, who likes to sue people for the sake of suing. Watson notes his interest in astronomy and the telescope atop his house, often used for searching the moorlands for the escaped convict.
When Watson mentions that telegraph did not make it into Barrymore's hands, and he describes Sir Henry's questioning of his butler. Barrymore admits that he did not receive the wire from the postman himself, but insists that he was indeed at home that day. When Barrymore wonders what all the questions are about, Sir Henry appeases him by giving him a box of old clothes.
Watson reiterates his suspicions that Barrymore, whose wife he has once again been seen crying, is up to no good. Late one night, Watson is woken by the sound of footsteps outside his door. Peeking out, he sees Barrymore, silhouetted by a candle he is holding, skulking down the hall. As Watson follows him, he sees the butler go up to a window, and hold his candle aloft as if signaling to someone. Suddenly, he lets out an impatient groan and puts out the light. Watson makes it back to his room just in time, and later that night hears a key turning in a lock. Watson offers no speculation, leaving the theorizing to Holmes.
Having investigated the window that Barrymore used, Watson determines that this particular window has the best view of the moor. Watson suggests his suspicion of a love affair between Barrymore and a country lass, which would explain his wife's crying. Informing Sir Henry, who claims to have heard Barrymore's late night activity, Watson plots a late-night stakeout to catch Barrymore in the act.
Meanwhile, Henry's romance with Miss Stapleton hits a rough patch. Henry, going out to meet her, excuses Watson of his duties as bodyguard, lest the doctor turn into a chaperone as well. All the same, Watson trails the baronet and sees him walking with Miss Stapleton. As Henry bends in for a kiss, Stapleton arrives on the scene, yelling and carrying on inexplicably. As the Stapletons depart, Watson reveals himself to Henry, who wonders whether Stapleton might be crazy. He things himself a worthy match for Miss Stapleton, though he admits that on this occasion she refused to talk of love and only offered mysterious warnings. Later that day, Stapleton meets Sir Henry at home to apologize for his over- protective nature, and invites him to dinner next Friday.
Meanwhile, Watson and Henry's stakeout takes two nights of vigilance. On the second night, the two hear Barrymore and follow him to his window. Watson watches as Sir Henry confronts him. Shocked and bewildered, the butler tries to furnish an excuse, but Sir Henry insists on the truth. As Barrymore waffles, protesting, Watson goes to the window, figuring that another person out on the moor must be matching Barrymore's signal. Sure enough, a light shows up across the moor, but the butler refuses to talk, even at the expense of his job. Suddenly, Mrs. Barrymore arrives and explains everything. The light on the moor is a signal from the escaped convict, who turns out to be her brother. The Barrymores have been feeding and clothing the man so he does not starve out on the moor. Excusing the Barrymores, Henry and Watson determine to go out and capture the convict, so as to protect the community. On their way toward the light, though, the pair hears the loud moaning of a wolf and wonders whether they should continue their adventure. Watson even admits that the locals suspect the braying to be the call of the Hound of the Baskervilles.
Frightened but determined, Sir Henry insists they proceed. When the pair finally reaches the flickering candlelight, they spy a small crevice in some rocks where candle and convict are carefully hidden. The convict turns out to be all the two might have expected: haggard, unkempt, and animal-like. When Watson moves in for the kill, though, the man manages to escape. Just then, as they make their way home, Watson catches sight of a lone figure, silhouetted against the moor. But as suddenly as the tall, mysterious figure appeared, the figure is gone.
There are several clues presented in Chapter VIII but little analysis: we learn of Stapleton's deep passions and Watson reiterates Miss Stapleton's exotic beauty. At the same time, the novel moves forward when the subplot of the escaped convict is addressed, and we are left to wonder how the convict figures into the broader mystery.
At the end of the chapter, when Watson leaves it to Holmes to figure things out, he is also leaving it to us to come up with our own theories. Instead of involving Holmes, who is could surely figure this all out quickly, Doyle lets Watson tell the story, thus leaving the clues disconnected and the legend intact. Though Watson seems pleased that his master entrusted him with so much responsibility, it will turn out that Holmes did not trust him at all, and the doctor will end up looking more like a fool.
In this section, we also meet Mr. Frankland, who serves as a much-needed dose of comic relief in an otherwise grim tale. He talks of the locals burning him in effigy or carrying him through the streets, depending on whether he has done them a service or a disservice on that particular day. At the same time, the character of Frankland satirizes the idea of entitlement and hierarchy, although it is not clear which side he is on. Frankland's gratuitous lawsuits, aimed at protecting what he sees as his rights, suggest that Doyle has a humorous take on this character's actions and opinions. But we are unsure whether Doyle is satirizing all entitlement, or a middle- and lower-class assumption of the rights of the nobility.
In the same vein, when we get a glimpse of Sir Henry's romantic life in Chapter IX, the themes of entitlement and hierarchy reappear. Talking with Watson about his failure to woo Miss Stapleton, Henry is utterly baffled that the non-noble Beryl and her brother would reject so good a marriage. In assuming his own suitability, Henry acts as if he is entitled to a marriage with a woman of a lower class. By doing so, he mimics the assumptions of his ancestor, Hugo, who started the curse when he ignored the entitlement—to dignity and to self- determination—of even the lowliest of lower classes.