You...You ever wonder what you'd be like if you stript, stripped away all the surface? Might find you're not as nice as ever'body thought. As you thought.
Jack, while performing with Katy-Ann in a lipdub for Stan, recalls her praising him for having stopped drinking, and hopes to be a better man for her, to at least "get close to her level." Shortly afterward, Katy-Ann comes by his house for a date, just as his mother's heading out, and makes herself at home while waiting for him to return. Entering his room, she discovers an unopened six-pack of beer. When his father comes home unexpectedly, she lies about having to cancel on Jack and takes off, sneaking the beer out with her. Once in her car, she weeps and shouts, "He has me!
The next day, she phones Lisa and Brandi, asking them to meet her in the woods. There she tells him that Jack has apparently started drinking again, and that in order to understand his dependency, she intends to get drunk on the six-pack she took from him. When Lisa asks why she and Brandi are there, Katy-Ann explains they're to keep her from doing anything stupid once she's drunk, and also because of all her friends she can trust them not to judge her.
Going through the pack as a first-time drinker, Katy-Ann swings through a number of moods: fear that the alcohol will reveal an ugly inner self, disgust at herself for being a "tease" to Jack by not having sex with him, skepticism about her religion's moral code (while still showing contempt for what happened between Rich and Penny, and between Stan and Michelle), comically over-the-top horniness (leading her to try taking off her pants while screaming for Jack) and back to skepticism about her faith. After Brandi denies her the last beer, she gets sick and lets her friends take her home to bed.
That night, a concerned Jack comes to visit his sober, but still sick, girlfriend. She tells him she found the beer in his room and admits to having stolen it, even apologizing for not having trusted him, while asking why he failed to earn her trust. Jack calmly explains that he hasn't in fact resumed drinking. The six-pack was one he, Rich and Stan had stolen from a wealthy teen's party they'd crashed. As they never got around to sharing it, Jack, after Rich left town, decided to keep it unopened as a memento. Katy-Ann doesn't quite trust his story, so he explains that beer spoils...and it'd been in his unrefrigerated room for over a year.
Katy-Ann, relieved, regrets not having confronted him instead of acting hastily, then bursts out laughing. She tells the confused Jack she's realized the problem between them: he still feels he's on a lower moral level than her. So in order to disabuse him of that, she begins to tell him what she did with the beer. (The arc ends before we find out how much she told him.)