Don and Kathy are strolling around the studio lot. Kathy lets it slip that she was lying when they first met: not only does she know all about Don's career, she—gasp!—reads the fan magazines she was ridiculing. Four or five a month, in fact.
She and Don laugh it up.
While she's on an honesty roll, Kathy also admits to saying some pretty awful stuff the first night they met.
Don says he deserved it, but admits that it did bother him. And he hasn't been able to stop thinking about her since. Smooth, Don. Real smooth.
Don says he wants to tell Kathy something, but he can't do it without the proper setting because he's such a ham. How, um, romantic?
Conveniently, they're standing right next to a giant abandoned soundstage. Don brings her inside and sets the scene.
He fires up some moonlit mist (read: a fog machine), 5000 KW of stardust, a soft summer breeze (a.k.a., a fan the size of a Volkswagen), etc.
He nudges Kathy up a ladder and calls it a balcony. Now he's finally ready to talk.
Except he doesn't talk, he sings a love song called "You Were Meant for Me."
"You Were Meant for Me" previously appeared in not one, but two movies, both from 1929: The Broadway Melody and Hollywood Revue of 1929 (source).
The gist of the song is—get this—Don thinks Kathy was meant for him. Then they dance. Kathy looks pensive. And a more than a little bit enchanted.