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We're back to the battlement with Hamlet, Horatio, and Marcellus.
While waiting for the ghost, Hamlet and Horatio look through the windows of the palace at Claudius, who is carousing drunkenly. Hamlet is disgusted.
The ghost shows up, and Hamlet is freaked out. He wonders if it's a "spirit of health or goblin damned." Translation: Is this a friendly ghost, or an evil spirit sent from hell?
History Snack: What did Elizabethans think about ghosts? Well, it depends on the Elizabethan. When Shakespeare wrote Hamlet, there was a whole lot of religious and spiritual confusion in Europe, what with the recent Protestant Reformation and England breaking from the Catholic Church under King Henry VIII. One of the ideas the Protestant Church rejected (in 1563) was the notion that spirits who were stuck in Purgatory, a place where sins were "purged," could come back and ask the living for prayers that would help them get to heaven faster. Basically, Protestants (and England and Denmark were Protestant nations) said no more Purgatory and no more ghosts. Period. That makes the Ghost's appearance even more confusing for the play's characters and audience
The specter beckons Hamlet forward in a horrible and ominous way.
Hamlet's friends get freaked out (understandably) and tell him not to go with the evil-spirit-looking thing, since it might convince him to do terrible things, or make him go insane.
Marcellus then gets to say the really cool line, "Something is rotten in the state of Denmark."
Hamlet ignores his friends' warnings because, obviously, and the ghost leads Hamlet away for a private conversation.