Mary, Pippin, Frodo, and Sam are having a wonderful time drinking and singing in a pub. Sam is smitten by Rosie, but too shy to make a move.
But when Frodo gets home, he finds Bag End completely torn apart.
Luckily it was just Gandalf searching for the ring.
Frodo shows it to him and Gandalf casts it into the fire. The ring remains cool and now bears the words, in the Black Speech of Mordor: "One Ring to rule them all, One Ring to find them, / One Ring to bring them all and in the darkness bind them."
Gandalf confirms this is the One Ring. He tells Frodo of its power, and that the dark army knows through Gollum where the ring is.
Sam also knows this because he was totally eavesdropping (sorry, he was pruning the hedges and just happened to hear).
Gandalf has Sam accompany Frodo on his journey away from the Shire and toward the town of Bree, where Gandalf will meet them at the Prancing Pony.