There is a "little creature" on Harry's bed with "large, bat-like ears and bulging green eyes the size of tennis balls" (2.1).
Harry realizes that it was these eyes he saw peering out of the hedge that afternoon.
The creature tells Harry it's an honor to meet him.
The creature is called Dobby, the house-elf.
Harry invites Dobby to sit down, and Dobby bursts into noisy tears of gratitude.
Dobby has never been asked to sit down by a wizard.
Harry comments, "You can't have met many decent wizards" (2.20).
Dobby agrees, and then starts banging his head on the window to punish himself for speaking ill of his family.
Harry again frantically tries to get Dobby to shut up.
The thing is, as a house-elf, Dobby is magically bound to a wizarding family.
He is so deeply enslaved to them that he has to punish himself whenever he does anything they might think is wrong (even if they don't know about it).
Harry asks if he can help.
Dobby wails with appreciation.
Harry blushes and begs Dobby to be quiet.
Dobby finally comes to the point: "Dobby has come to protect Harry Potter, to warn him, even if he does have to shut his ears in the over door later...Harry Potter must not go back to Hogwarts" (2.48).
Dobby can't explain further where this threat to Harry's safety is supposed to be coming from.
All of the noise Dobby's making draws Uncle Vernon upstairs.
Harry hides Dobby just in time, but Uncle Vernon warns him, "One more sound and you'll wish you'd never been born, boy!" (2.68).
Harry discovers that Dobby has been stopping all of his letters from Ron and Hermione.
Dobby is trying to convince Harry that there is nothing at Hogwarts worth going back to.
Still, Harry stays stubborn. He absolutely refuses not to return to Hogwarts.
So Dobby tries one last, desperate tactic:
He goes downstairs and levitates "Aunt Petunia's masterpiece of a pudding, the mountain of cream and sugared violets" (2.87).
He drops the pudding to the floor and then disappears with a snap of his fingers.
There are screams from the living room and everyone rushes in.
Uncle Vernon tells the Masons, "Just our nephew – very disturbed – meeting strangers upsets him, so we kept him upstairs" (2.97).
Uncle Vernon might still have been able to make his deal if "a huge barn owl" had not swooped in to deliver mail after dinner.
Mrs. Mason, who is afraid of birds, "screamed like a banshee and ran from the house shouting about lunatics" (2.99).
So Uncle Vernon's deal is ruined, and he blames Harry.
Uncle Vernon reads the letter the huge barn owl dropped on Mrs. Mason's head.
The letter that the barn owl has delivered contains a warning against using magic as an underage wizard.
The Ministry of Magic seems to think Dobby's Hover Charm was actually cast by Harry.
So now, the Dursleys know that Harry isn't allowed to do magic outside of school.
They take advantage of Harry's weakness by locking him in his bedroom.
It's been three days since Harry has been locked in.
His aunt stuffs a small amount of food through a cat-flap in the door three times a day, and he gets to go to the bathroom once in the morning and once at night, and that's it.
Harry has no freedom at all.
That night, Harry falls asleep and has anxious dreams.
Something wakes him up, though: there is someone outside the window.