Whilst Ash and his friends board a ferry taking them to Cinnabar Island, Misty and Brock express their excitement over visiting the island. However they are interrupted by the antics of Gary Oak, whose presence on board surprises Ash. As various tourists engage in leisurely activities, Ash comments glumly that most of them are in fact Pokémon Trainers. Gary laughs at his deductive skills, explaining that Trainers haven't visited Cinnabar Island since his grandfather was a Trainer.
Gary reveals that Cinnabar Island has since become a resort, which is why he is going there. When Ash proclaims he will receive a Gym badge after defeating the Leader, Gary states that he is wasting his time as Cinnabar Island no longer has a Gym. As the ferry docks at the island, Ash realizes that Gary was telling the truth after all, as a Jigglypuff follows them ashore. Brock wonders why Cinnabar Island has become so popular in recent years, as a resident approaches them, stating that the answer to that is a riddle.
"What do tourists think is hot and cool?" is the first riddle, which is solved by Misty, who correctly guesses it to be a Hot Springs. He explains that due to the hot springs popping up due to the volcano, tourists have become attracted to Cinnabar Island. After Ash asks where the Gym is, the resident responds with another riddle "His gym is right where you put your glasses". Misty states that it is "right in front of your eyes", to which he points to a dilapidated building. He reveals that Blaine abandoned the gym after getting tired of battling tourists.
He offers his consolations to Ash, giving him a card to the "Big Riddle Inn". When they look up, the resident has vanished, leaving them puzzled. After they walk through the town to search for the Pokémon Lab, they are disappointed to discover it is just a souvenir shop. Ash's stomach grumbles, as the three head off to the Pokémon Center in search of food. Team Rocket observe their movements, complaining about the ill successes of their food stall. Meanwhile, Nurse Joy apologizes to the group, stating that there is no more room left in the Center.
They then come across a series of hotels, all of whom are completely booked out. Ash smells the aroma of food wafting out from one of the hotels, noticing that Gary is having a banquet. After attempting to entice them with his leftovers, Jigglypuff arrives on stage, prompting them to flee. When Jigglypuff begins to sing, all of the occupants fall asleep, only for Jigglypuff to draw on their faces. Brock brings to Ash's attention the Big Riddle Inn card, which has the riddle "If you look near the swing, you'll see my hands, or at least your face" embossed on it.
Misty figures out the riddle with post-haste, as they head to the Big Riddle Inn situated above the swing. Upon their arrival, the owner gives them free accomodation due to Misty's quick thinking. After Ash's stomach growls once more, the owner assumes he wants food as well. Meanwhile, as several Pokémon train within the Pokémon Lab, Jessie, James and Meowth attempt to capture them. They drop a bomb on the building, as the owner is notified of the ongoing attempt. When they arrive, Ash frees the Pokémon through the use of his Pikachu and Pidgeotto.
As a show of thanks for Ash's quick thinking, the owner informs him that Blaine constructed a secret gym with the riddle "It's in the place where firefighters never win". That night, whilst Ash and the others rest in the hot springs, they try to contemplate the meaning of the owner's riddle. With Togepi's assistance, they gain access to a secret entrance underground passage. And in the process, the dividing wall was knocked over causing total embarassment. As they venture through the passageway, they come across a secret battling ground.
Suddenly, the owner appears before Ash and his friends and congradulates them on solving the riddle. (The answer was inside the volcano). When Ash asks what's going on, the hippie says "It's not a hat but it keeps your head dry. If you wear it, it means you've already lost it." Misty answer was a wig because it keeps someones head dry in the rain and the reason someone wears it is because they already lost their hair. After Misty answers the riddle, the hippie reveals himself to be Blaine in a disguise. Ash instantly challenges him to a Pokémon battle, which Blaine accepts after seeing he is a willing Trainer. As the battle commences, Ash summons his Squirtle, which prompts Blaine to release his Ninetales. Despite the fact that Squirtle has a type advantage over Ninetales, Squirtle gets knocked out relatively easily. Ash is surprised by this, releasing his Charizard to face off against Blaine's second Pokémon.
Blaine then releases his Rhydon, swapping out with Ninetales. However, due to Charizard's frequent disobedience it is unable to fight Rhydon and is subsequently defeated by Horn Drill. Down to his last Pokémon, Ash calls upon his Pikachu to fight against Rhydon. Pikachu manages to achieve victory over Blaine's Rhydon through conducting electricity through its horn. As Pikachu defeats Rhydon, Blaine taunts Ash with a riddle about his last and most powerful Pokémon. He says "It has a power that interests you because it turns it's opponents into Ash." Hen then calls upon his Magmar to the battle. Pikachu charges at Magmar with a full power Thundershock, which is ineffective.
Brock assumes this trait to be due to Magmar channeling heat within his body to dispel the electricity. Magmar then moves onto the offensive, attacking Pikachu with a barrage of Fire Punch attacks. Pikachu is seemingly helpless to stop the onslaught, being pushed gradually towards the edge of the platform, looming precariously over the sea of lava.
- This is the first episode to use the Pikachu's Jukebox song at the end.
- Blaine's riddles in this episode aren't the same as the ones at his gym, where there are Pokémon trivia questions instead.
- When Jigglypuff jumps out, Gary says its entertainment even him being the grandson of Professer Oak and him being sung to sleep in Attack of the Prehistoric Pokémon, he does not seem to know/remember that Jigglypuff's song makes you fall asleep.
- The "Who's that Pokémon?" in this episode is Magmar.
- Ash's stomach growls. Ash is embarrassed.
Hotel Owner: "I... Guess you want dinner too."