"The Houyhnhnm's notion of truth and falsehood. The author's discourse disapproved by his master. The author gives a more particular account of himself, and the accidents of his voyage."
The Master Horse is confused because he feels doubt, but he is also completely unfamiliar with the idea of lying.
Gulliver tells the Master Horse about the poor treatment horses often receive as work animals in his home country.
The Master Horse is utterly disgusted to hear that Yahoos ride Houyhnhnms where Gulliver comes from. How dare they, when Houynhnhnms are so much stronger than Yahoos?
Gulliver talks about the process of breaking horses.
The Master Horse continues to be outraged. He admits that, if horses in Gulliver's country are stupid, then it make sense that the Yahoos win out, because reason beats strength every time.
The Master Horse wants to know if the Yahoos in Gulliver's country are more like Gulliver or like the Yahoos of Houyhnhnm Land?
Gulliver answers that they are more like him, which the Master Horse actually thinks is something of a disadvantage. Sure, they're better-looking, but they're also physically even weaker and less suited to survival.
It takes Gulliver ages to explain to the Master Horse about his own origins, because there are no words in Houyhnhnm language for things like deception, power, wealth, lust, or envy.
The Master Horse finally grasps what Gulliver is getting at when he describes human nature, and wants to hear more about European culture.