The small council is a group of advisers who help the king administrate the Seven Kingdoms. Under the reigns of King Robert and King Joffrey, they've mostly just been ruling the realm thanks to the king's lack of interest:
Varys, the Master of Whisperers, is Tyrion's most trusted political ally in King's Landing. Well, that might not be accurate, but he's certainly the political ally Tyrion uses the most. Varys helps him protect Shae by setting up a secret route to her manse, and later he arranges for her to enter Lady Tanda's service in the Red Keep. Varys also helps Tyrion gain control of the city watch by setting up Ser Jacelyn Bywater as its commander. And, of course, he always has a juicy secret to whisper in Tyrion's ear.
But Tyrion still questions whether he should trust Varys as much as he does. Varys professes that his loyalty is to the realm and that he served both Jon Arryn and Eddard Stark as best he could (9.Tyrion.92). Yet Tyrion cannot decide where Varys's true loyalty lies. He ultimately admits to Varys, "I feel as though you are the best friend I have in King's Landing, and sometimes I feel you are my worst enemy" (16.Tyrion.138). Varys feels the same about Tyrion.
We also learn how Varys became a eunuch in A Clash of Kings. While a boy apprenticing with an actors' troupe, Varys was sold to a mysterious man. The man took Varys home, drugged him, cut off his manhood, and fed it to the flames, chanting all the while. Left to die, Varys resolved to live, becoming a thief and later a spy once he understood the value of information when compared to gold.
As he admits to Tyrion:
"Yet I still dream of that night, my lord. Not of the sorcerer, nor his blade, nor even the way my manhood shriveled as it burned. I dream of the voice. The voice from the flames. Was it a god, a demon, some conjuror's trick? I could not tell you and I know all the tricks. All I can say for a certainty is that he called it, and it answered, and since that day I have hated magic and all those who practice it. If Lord Stannis is one such, I mean to see him dead." (45.Tyrion.28)
That's the closest we get to understanding where Varys's loyalties lie and why he does what he does. He hates magic and those who practice it. But how does becoming the Master of Whisperers help that cause? Why does he aid Tyrion, and is he even aiding Tyrion at all? By the end of A Clash of Kings, we cannot answer these questions. All we can say is that we hope they are answered soon because this guy totally intrigues us.
We don't learn much more about Petyr Baelish, a.k.a. Littlefinger, than we did in A Game of Thrones. He's a master manipulator and perhaps the most devious man in the Seven Kingdoms. Tyrion does not trust Petyr—he knows Petyr betrayed Ned Stark and that he convinced Catelyn the dagger used by Bran's would-be assassin belonged to Tyrion (18.Tyrion.104). So, yeah, there's some bad blood brewing there.
Petyr's exploits during A Clash of Kings are few. He crafts the story that Stannis's daughter is the result of a premarital affair between Lady Selyse and Patchface, and he also negotiates with Mace Tyrell, convincing the lord to switch sides to the Lannisters'. For his help in the negotiations, Petyr is granted the castle of Harrenhal and the title Lord Paramount of the Trident (66.Sansa.35). While it may seem like Petyr is moving up in the world, let's not forget that Harrenhal has had like four owners in this novel alone.
So good luck holding on to that realty, buddy.
As the Grand Maester, Pycelle is honor bound to serve the realm and the king, but Tyrion discovers that he's been in the Lannisters' corner for years now.
Tyrion weeds out Pycelle's true allegiance when he feeds Varys, Pycelle, and Littlefinger three different versions of the same story. When Cersei accosts him about the information found in Pycelle's story, he knows who the traitor on the council is. Ha. Busted.
Bringing his Mountain men with him, Tyrion confronts Pycelle and learns that the old maester has been helping the Lannisters for years. Even so, Pycelle did not have a hand in Robert's death nor did he poison Jon Arryn (26.Tyrion.153). Tyrion decides to have Pycelle thrown in the black cells. As the Mountain men drag the Grand Maester away, he screams, "[A]ll I've done has been for Lannister…" (26.Tyrion.162). Looks like it wasn't quite enough.
Even by Seven Kingdoms's standards, Janos Slynt's tenure on the small council was brief. Realizing Slynt is Cersei's man to the core, Tyrion removes Slynt from his command and forces him to join the Night's Watch (9.Tyrion.59). No doubt he'll be joining Jon Snow's escapades in later volumes—for now though, happy sailings, Slynt.