This is the last of the three chapters that represent the conversation between Quentin and his father before Quentin's visit to the Sutpen house in the middle of the night with Rosa Coldfield.
In this chapter, Mr. Compson produces a letter that he gives to Quentin to read, at the beginning. It's not clear yet where the letter came from or what it means (it's a letter from Bon to Judith, written during the Civil War). But Mr. Compson quickly resumes his narrative and explains.
Much of this chapter involves Charles Bon, and this chapter introduces him to the reader through Mr. Compson's eyes. Mr. Compson begins with the point that Henry must have loved Bon to give up his family and his inheritance when the marriage was forbidden. Mr. Compson talks about Bon as resembling Sutpen (because he appears in Jefferson with no known history), but with the refinement and experience of a European gentleman. Mr. Compson reveals that Bon had a wife and child in New Orleans, though the wife had "negro blood." This wife is an "octoroon," or one-eighth African-American (she is not given a name, though the son is named Charles Etienne de St. Valery Bon).
Mr. Compson mentions that the letter he has given Quentin is a letter from Bon to Judith, that Judith gave to Quentin's grandmother for some reason.
Mr. Compson speculates about the way that Bon interacted with other students at the University of Mississippi, and how the wealthy and sophisticated young man, who was also a little older than his fellow students, was probably idolized by many of the country-bred young men who would attend that university. He talks about Bon's sophisticated dress and manners, and the way that his fellow students (including and especially Henry) probably idolized and imitated him.
Mr. Compson speculates, too, that the reason that Henry killed Bon was because of this other wife in New Orleans, and because Bon refused to dissolve his marriage to this woman before he married Judith. So, according to Mr. Compson, Henry wanted to prevent Bon from committing bigamy.
Mr. Compson talks about the timing of Henry and Bon's visits to Sutpen's Hundred, and he suggests that Bon and Judith spent little if any time together. Instead of the two of them falling in love, Mr. Compson says that Henry seduced Judith into marrying Bon, through a desire to control and possess her. In other words, Henry desires his sister, wants to preserve her virginity forever (since he can't be the one to take it), realizes that it won't last forever, and tries to pick the man who will take it from her so that he can participate vicariously in the taking.
Sutpen's trip to New Orleans after the first encounter with Bon comes up again, and Mr. Compson points out that Sutpen wasn't the kind of person who might take a 600-mile trip like this just to "investigate" someone. Bon visits for a few weeks at the end of the spring term in 1860, and then returns to New Orleans. Bon starts writing letters to Judith that summer, and Mr. Compson says that Henry probably read them all. That Christmas, Henry and Bon come back to Sutpen's Hundred. Sutpen himself has recently come back from his trip to New Orleans. The night of Christmas Eve, Sutpen invites his son into a private meeting, and he tells Henry that he will not allow the wedding, and he tells Henry why. Mr. Compson suggests that Sutpen tells Henry that Bon has a wife and son in New Orleans, and that this is the reason for what happens next.
Henry calls his father a liar and becomes so upset that he renounces his right of inheritance to his father's land. He and Bon ride off in the night and take a steamboat to New Orleans. In New Orleans, Mr. Compson speculates that Bon introduces Henry to his mistress and perhaps even his son, but that Bon would need to gently introduce Henry to the fact of his wife and son. If this is the reason that Henry has abandoned his family and inheritance (which, of course, would have been enormous), then Bon needs to be careful about revealing the truth, and about telling Henry that Sutpen was correct about the wife and child.
Mr. Compson then begins a long discussion of what happens in New Orleans, after Henry has given up his home and family for what he sees as an insult to his friend Bon. Mr. Compson explains his theories of Southern women and the way that they depend on slave women and prostitutes for their purity. He imagines the argument between Henry and Bon about the mistress, and he articulates a few arguments that Bon might have made to defend his marriage to the woman and the absurdity of the Southern caste system (that the one-eighth "negro" blood in his "octoroon" mistress should be considered more important than the seven-eighths white). Mr. Compson also speculates that Bon and Henry had a peculiar bond that Judith was more an instrument of than an active agent in-in other words, Bon didn't just want Judith and didn't try to run away with her. He wanted both Henry and Judith-Judith was an acceptable way to express their special bond. (Not quite homosexual or homoerotic but homosocial-something seemingly Greek or Platonic, a kind of passionate intellectual bond.) He quickly mentions that Bon and Henry join the company of Confederate soldiers organizing at the University and enter the war, and how the two of them must have hidden from the fanfare of departing soldiers that was so close to Judith.
Mr. Compson turns his attention to Judith, and he speculates about her life after her mother's death and while waiting for Bon, alone with Clytie, at Sutpen's Hundred. He skips quickly to Judith's decision, after Bon is dead and buried, to give the letter that Bon wrote her to General Compson's wife (which is why they now have it). Quentin reads the letter, and the text of the letter is shown. In the letter, Bon talks about the experience of a successful raid on Union troops to steal supplies, only to discover that they have fought for wagonloads of stove polish. He says that he has decided to return to Sutpen's Hundred, apparently to marry Judith.
The chapter ends with Mr. Compson trying to re-create the last moments of Henry's and Bon's return to Sutpen's Hundred, and the conversation and actions that led up to Henry's murder of Bon just before their arrival, after a thousand-mile return trip. The last remarks are the end of Wash Jones's announcement to Rosa Coldfield that Henry has killed Bon.
More than one person has said that Mr. Compson exaggerates and distorts his image of New Orleans. Mr. Compson himself wants the kind of life that he thinks Bon had, with virtually complete freedom to do as he pleases, and with a wealth of cosmopolitan experiences and pleasures available. Mr. Compson also fashions a male fantasy of slave women bred for sale as concubines, and he exaggerates and projects typical stereotypes of New Orleans and antebellum (pre-Civil War) Southern culture. Mr. Compson has very little information about what happens in New Orleans between Bon and Henry, and he imagines almost the entire chapter.
This chapter presents one of the few pieces of hard evidence in the novel: the letter from Bon to Judith. This letter, the text of which is presented at the end of the chapter, shows Bon's language and some of his thinking, which bears a noticeable resemblance to Mr. Compson's language and thinking. Based on this letter, perhaps Mr. Compson is not wrong to invent the story that he does.
It is important, though, to notice that Mr. Compson is not presenting a factual account. Most of this chapter is just an educated guess, by an intelligent but biased and somewhat "provincial" man. The goal of the chapter seems to be an attempt to explain Henry's decision to murder Bon, the man that he had given up his family and inheritance for, and the man that he spent four years fighting alongside in the Civil War.