After a rather intriguing and suspenseful opening episode, Damages continues in much the same way by expanding on the pilot's final moments and introducing new elements that will become important in later chapters.
In the "present", i.e. what we see in the "grainy" flash-forwards, Ellen Parsons has bigger problems than she anticipated, refusing to talk to anyone and becoming the prime suspect in a murder investigation when the police find the dead body of her fiancé, David Connor (Noah Bean). We then go back six months, learning that Patty Hewes effectively hired Ellen because of her connection to Katie Connor (Anastasia Griffith), David's sister, who happened to be in Florida the same weekend that Arthur Frobisher allegedly did what he's accused of. If Katie saw something happen, her testimony could prove to be the crucial blow to Frobisher's defense, which is why Ray Fiske is trying his best to destroy Katie's credibility. Frobisher, on the other hand, is contemplating other options, of the less likable kind.
The episode moves the story forward very well, while still suffering from a bit of slowness in certain points (this is still the pre-trial section of the season) and the fact that the flash-forwards, suggestive as they may be, are actually less interesting than the main plot. What adds that extra edge which sets this apart from other crime dramas is, like in the pilot, the spot-on combination of excellent dialogue (again, what else was to be expected from a former Sopranos writer) and a terrific ensemble cast: by establishing early on that his character is pretty much as bad as they say, Ted Danson manages to add a convincing layer of darkness to his otherwise charming persona, Zeljko Ivanek remains impeccable as Fiske and the Close/Byrne interaction loses none of its spark. Even Bean and Griffith, stuck with what would be mere plot devices in other dramas, get the chance to play real characters as opposed to empty stereotypes.
In short, Jesus, Mary and Joe Cocker (each episode takes its title from a line of dialogue spoken by one of the cast members) builds successfully on the pilot's promise, suggesting there's more to Damages than initially expected (another crime show with a famous lead).