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Ippolit's been living with the Ivolgin's for five days now. He didn't really have a fight with Myshkin or anything, but apparently it was time for a change of scenery.
He seems to be feeling better, and not coughing up blood quite so much.
Meanwhile, General Ivolgin has gone totally cold turkey and is crazier than ever. Only Kolya doesn't know what the deal is with dear old dad, and he brings him a bottle of booze to try to fix the situation.
Ivolgin comes into the room screaming at Ippolit for harassing him, and at Ptitsyn for letting Ippolit stay in the house. (Ptitsyn is a small-time money lender and the only one in the whole family earning an income. It's his house, and they are all dependent on him—this is why Varya married him in the first place.) It's pretty clear that what Ippolit has on Ivolgin is that he feels free to all-out make fun of him.
Outwardly, though, it seems that Ippolit is making fun of yet another one of General Ivolgin's crazy delusional lies about famous people he's known.
Ganya is shocked that his dad is making this crazy scene, and also starts to argue with the delusions.
The general threatens to leave the house altogether. Which, honestly, it doesn't seem like anyone would mind so much, except that the neighbors would see and gossip about it.
Meanwhile, Ganya starts yelling at Ippolit for spreading the info about General Ivolgin.
Ippolit stays calm, says he's moving out of Ptitsyn's house, and then tells Ganya exactly what he thinks of him—that he's a totally ordinary nothing of a person.
After he leaves, Varya is about to have a fit, when Ganya shows her a note from Aglaya—she wants to meet both of them at seven the next morning on that same green bench.
Meanwhile, the general really does storm off into the street, with everyone watching.