The third dialogue finds Hylas wallowing in a new kind of skepticism. We can only know how things appear to us, he tells Philonous upon their meeting. We can never know what things are really like, their real natures. Here, in place of skepticism about the existence of sensible things, he is worrying about skepticism about the nature of things. These worries are not unrelated, but they have a different focus. Consider, for instance, that you are perceiving a piece of gold. You could have two sorts of skeptical worries about this perception. On the one hand, you can wonder, "Is there really any gold in front of me? Maybe this is just an illusion caused by an evil scientist. Or maybe I am just hallucinating from a high fever." On the other hand, you can be convinced that there is a piece of metal in front of you, of the sort we call "gold", but you can wonder if you have any idea what gold really is: all you know of gold is that it is yellow, malleable, soluble in aqua regia and so forth — in short, you know all of its sensible qualities. But we tend to think that in addition to these sensible qualities, there is a deeper level of reality — what the gold is really like, what makes gold the kind of thing that it is. This is something like the microscopic structure of the gold. Hylas is worrying here that he can never have access to this real nature, but only to the sensible qualities of things.
Philonous is annoyed that Hylas is still tempted by skepticism. Of course you know what the world is really like, he insists. There is no difference between what the world is like and how it appears to you: real things just are our sensations, so there can be nothing beyond these sensations to worry about being ignorant of. The real nature of objects is nothing above and beyond their sensible qualities. For good measure, he also points out that his idealism is immune to the other skeptical worry: we can never worry about whether the gold we are perceiving really exists or not, because the mere fact of our perceiving it constitutes its existence. It is a contradiction to wonder whether something we are perceiving really exists. For all sensible objects, esse is percipi.
Hylas, though, does not believe that idealism can really save him from skepticism, and he vows to undermine this system in exactly the same way that Philonous just undermined materialism: he will set forth a series of objections and show that idealism cannot survive these any better than materialism could.
Hylas' first attempt at an objection is: if all sensible objects are mind- dependent, what happens when you die? Will these things just stop existing? Philonous, though, has already answered this. No real thing's existence depends on his mind in particular, they all depend on the mind of God. God comprehends all things and exhibits them to us according to his patterns which we call the "laws of nature".
Hylas tries again: but if ideas are inert and God is active, how can we have an idea of God? More broadly, it seems that we can have no idea of any spirit, just as Philonous argued that we can have no idea of matter. Philonous has an answer for this worry as well. It is true, he admits, that we have no idea of God or, for that matter, of any spirits. Nonetheless, we know of their existence, which is more than we can say for matter. We know of ourselves, as spirit, intuitively through reflection. We cannot fail to know that we ourselves exist. We know that God exists because we have a demonstrative proof of his existence, which Philonous has already laid out. Though we have no actual idea of God, just as we have no actual idea of our own spirit, we do have a notion of this necessarily existing being; we get the notion of God by taking our notion of ourselves, and enlarging all of the powers, and deleting all of the imperfections. Finally, we know of other spirits (i.e. other people's minds) through a probable, rather than demonstrative, proof. We have all sorts of evidence which makes very likely the hypothesis that there are other minds in the world, other than just ourselves and God. When it comes to matter, in contrast, we do not have an immediate intuition, a demonstrative proof, or a probable proof. Furthermore, the very notion of matter is inconsistent and incoherent. So there is no analogy between our notions of matter and spirit, even though we have no proper idea of either.
In this section, Philonous collapses the final Lockean dichotomy: the distinction between real essence and nominal essence. The Scholastics, whom Locke viewed as his primary intellectual enemies, spoke about essences as those properties which make things the sort of things that they are. Essences, for them, were an obscure and complex matter. Locke attempted to show that what really does this work of sorting particular things into classes, is our abstract general ideas. Essences, which caused so much consternation for so long, are nothing but general ideas of the mind. These general ideas, he said, are formed by gathering together ideas of particular things, and then attending to the similarities among these things. For instance, to form the idea of "cat" I would take my ideas of Frisky, Snowball, Felix, and Garfield and abstract out the tail, the furriness, the size, the shape, the meow etc. I would take all of these similar observable properties and forge them into a new idea, the idea of "cat". This new general idea is what determines what in the world counts as a cat. If an animal fits my idea then it is a cat. If it does not, then it is not.