Book 1, Part 7: Perhaps the most famous episode in all of Don Quixote is the adventure of the windmills. Seeing a rather large grouping of windmills, Quixote believes he has encountered "thirty or more huge giants." Though Sancho tries to persuade his master that he is terribly mistaken, Don Quixote refuses to listen. Soon he charges the windmills, breaking his lance and injuring himself in the process. Afterwards, the Don swears revenge on the magician who he says changed the giants into windmills. Here, Sancho begins to realize that his master is delusional.
Next, they see two friars (the last people one would suspect of violence) escorting a lady along the same road. Don Quixote, always seeming to see something other than reality, believes that the friars are two enchanters who have kidnapped a princess. Again Sancho warns him, but Quixote attacks the monks nonetheless, wounding one of them. The squire quickly robs the injured churchman, calling it his rightful spoils of battle.
Finally, a Biscayan, who is also in the coach, challenges the knight to a battle, calling him a liar. The Don wins this fight as well, though his ear is injured in the process. The Biscayan then leaves, promising to pay tribute to the Lady Dulcinea, as Don Quixote commands him.
This struggle over, Sancho hopes that now he may get his island, but his master exhorts him to have more patience. When Sancho grows worried that the Holy Brotherhood, the 16th century Spanish police force associated with both the Church and State, will pursue them, Quixote explains that knights-errant such as himself are above the law, since they live according to a higher standard-one of chivalry. Later, he explains his actions in relation to his books, asserting, "I have precedent to guide me." He also tells Sancho that he knows how to make a balsam, an elixir of sorts, to heal himself. We also learn that in the tradition of knight-errantry, Don Quixote takes pride in fasting, much to Sancho's chagrin.
Book 1, Part 8: Spending an evening outdoors with some goat herders, Don Quixote is reminded of the Golden Age of men by some acorns, leading him to make probably the most important speech in Cervantes' work. Before the fall of man, when the earth was still a paradise of sorts, Quixote explains to some goat herders, Mother Nature provided all that man needed, making it needless to steal, cheat or lie. He goes on, "Neither fraud, nor deceit, nor malice had yet interfered with truth and plain dealing." Because the world is no longer in such a state, however, "the order of knight-errantry was instituted to defend maidens, to protect widows, and to rescue orphans and distressed persons," the knight continues.
Next, Sancho and his master come into a conflict with the Yanguesans, who have beaten Rozinante after he ventured near their herd of mares. After a struggle with these men, master and squire are left flat on their backs. Eventually they get up and begin to travel again, seeing an inn which Quixote tries to tell Sancho is a castle.