Donna finally sleeps with Eric, but when the guys find out that all they did was sleep, they tease him mercilessly. Hyde gets a job at the FotoHut, and finds out that compared to his boss, he's a workaholic. And Kitty has to work double shifts at the hospital, leaving Red to do the cooking.

Eric lies after accidentally running over Donna's cat; Laurie sets Kelso up for a fall; Fez sees "Fez's Angels" while under anesthesia to have his appendix removed.

Kitty calls on a divine power, of sorts, when Eric and Laurie forsake going to church; Kelso's budding beard stirs Jackie.

Donna finds a pair of panties in the Vista Cruiser and thinks that Eric is cheating on her with his lab partner. Everyone is in for a big shock when they find out who the panties really belong to. Red's doctor's appointment shows that he has high blood pressure, so Kitty puts him on a strict diet, which he finds inedible. Kelso gains a new nickname due to a mishap in the cafeteria.

Eric pulls Donna's pants down in public and reveals her granny panties to everyone. So he tries to make up by giving her sexy panties on Valentine's Day. When Kelso finds out that Laurie cheated on him he realizes how Jackie must have felt when he cheated on her with Laurie; to Jackie's surprise he doesn't want her to feel sorry for him. Fez asks Caroline to go steady with him and only afterwards does he finds out that she has some strange ideas about romance.

Eric thinks that Christmas just isn't as fun as it used to be when he was a kid, so Kitty suggests that he direct the church Christmas pageant. He has some artistic differences with the gang over how things should go. Kelso is upset that everyone is making fun of him for wanting to watch Christmas specials on television; and Red is upset over Bob's Christmas decorations.

Eric and Donna both start dating other people; Jackie sets Donna up with Kelso's older brother Casey, while Eric has his pick of the girls at school after being named Point Place High's most eligible bachelor. Fez thinks that he's finally going to lose his virginity, and looks for a place that he and Rhonda can use for that purpose. Bob becomes rich again and Red buys a Corvette.

When Eric decides to buy Donna a meaningful gift, he ends up getting her an engagement ring. But after discussing it with the guys, he realizes they are too young and the ring was a bad idea. Unfortunately, Eric already told Donna he got her a surprise and on their special evening out, he's put on the spot and forced to make the biggest decision of his life. Meanwhile, in an attempt to lift menopausal Kitty's spirits, Red gets her a dog: Schotzy.

Things are still bad between Red and Eric, so Kitty signs them up for the Point Place Paul Bunyan Pioneer Days Jamboree. The estranged men must work together in order to beat Charlie and Mitch, an obnoxious father/son team who have won the past two years. Meanwhile, Hyde doesn't understand why Leo hasn't called him back to work in a while. He takes the gang to the Foto Hut only to find the place has been completely cleaned out.

The Formans are horrified when they realize that Red has gone fishing - he only does that when he's really angry. When he finally returns, Red has his final say on Eric and Donna's decision to move. Meanwhile, Kelso, Hyde, and Fez decide to paint obscene pictures on the water tower as their senior prank. Hyde and Kelso's arguing over Jackie lands Kelso in the hospital, leaving Fez to face the police alone and Jackie to face her feelings about who she wants to be with.

Before a romantic evening with Eric, Donna realizes that she's missed taking one of her birth control pills. Both of them completely freak out and seek out Kitty's advice. Fez is still extremely angry about losing Suzy to Kelso, so he "dumps" Kelso and returns everything his former friend ever gave him. Everyone in the gang tries to console the unhappy couple while Suzy plots to reunite them.

When Eric accidentally sees Donna's wedding dress, he unintentionally rips it. But he only makes things worse in an attempt to rectify the mistake. Kelso, Hyde and Fez get a canoe and Red is forced to find a sentimental wedding gift for Eric for his wedding.

Kitty throws a party in honor of herself to boost her self esteem, but Bob feels that Midge is spending too much time with Wiliam Barnett and they have a fight, causing Midge to lock herself in the bathroom. Eric decides to "moon and trench" Old Man Shinsky's beautiful yard. Kelso, because Eric didn't make him First Lieutenant, takes his revenge on Eric, but that backfires on them both. And Hyde succumbs to the corporate life, which Jackie finds very sexy.

Red reluctantly agrees to take Kitty ice fishing, which doesn't turn out to be as bad as he expected. Kelso accidentally makes a threat on the President, prompting the guys to be paranoid about everyone they meet in an attempt to hide from the government. Donna takes Jackie to a karate lesson that yields unexpected results.

As Eric prepares to go to Africa, Kitty is still having problems dealing with his departure. Donna is also having problems; she can't come up with an appropriate going away gift, but some advice from Kitty puts her on the right track. Charlie accidentally sees Kitty naked, and his attempts at apologizing only make things worse. Jackie is still in Point Place after telling everyone she was leaving for Chicago; her attempts to give Hyde one last ~last~ chance don't quite go the way she hopes they would.

Hyde sets to fire Leo for mismanaging the record store, but ends up with a new employee; Jackie has a night out to move on from Hyde.