The episode began with another flashback where rebels broke into a building and apparently killed an emperor. The children went to some kind of nature excursion. After hearing stories from Satoru about two creatures, the Balloon Dog and Demon Minoshiro, the children decided to look for them. Eventually they found a Demon Minoshiro at some kind of building (it might have been the same from the flashback). It turns out that the Demon Minoshiro is some kind of library with knowledge from the mysterious past.
Episode 3 of From the New World was very interesting. I am beginning to enjoy this modality of having flashbacks at the beginning of the episodes, and then look at what Saki, Satoru, Shun, Maria and Mamoru are up to. I think episode 3 was particularly well done. Even though this world seems very mysterious and scary, the show is able to create a relaxing and enjoyable atmosphere. This episode gets a 10 out of 10.