The Lord Chamberlain and Lord Sands are making fun of the odd fashions that have been brought back to the English court by nobles who went to France. Sir Thomas Lovell enters with the news that a proclamation has been issued at the court urging people to abandon the French fashions. The three men agree that this is a good idea.
Lovell says that he is going to Wolsey's house for a lavish supper, and that the Lord Chamberlain and Sands are also invited. They agree that Wolsey is generous, and set out for Wolsey's house, St James's Palace.
At St James's Palace, Sir Henry Guilford greets the guests on behalf of Wolsey. Among the guests is Anne Bullen (Boleyn), who will become King Henry's second wife. Sands flirts with Anne.
Wolsey enters and sits on the chair of state. A group of strangers is shown in by a Servant. Their faces are covered with masks and they are pretending to be foreign shepherds, seemingly from France. In reality, this is the king and some of his courtiers in disguise. The strangers greet Wolsey. The Lord Chamberlain explains to him that they speak no English, but that they have heard impressive tales of Wolsey's party and could not fail to attend. Wolsey welcomes them.
The disguised king meets Anne and is struck by her beauty. He dances with Anne, and the rest of his party dance with other ladies. After the dance ends, Wolsey asks the Lord Chamberlain to tell the strangers that there is one among them who is more worthy of his chair of state than he is himself. If that person would make himself known, he would surrender it to him. The Lord Chamberlain conveys this suggestion to the strangers and they reply, saying that there is such a person, and that Wolsey must guess which is he. Wolsey correctly identifies the king, who takes off his mask.
The king compliments Wolsey on the large number of beautiful women present, warning that if he were not a churchman (and therefore, in theory, above reproach), he would judge him unfavorably. The king asks Wolsey the identity of the beautiful woman he just met, and Wolsey replies that it was Anne Bullen, daughter of Sir Thomas Bullen and lady-in-waiting to Queen Katherine. The king tells Anne that it was bad manners on his part to dance with her and not kiss her, which he does now. He is reluctant to part with her and orders the music to strike up for another dance.
These scenes have two main functions, serving to show the almost royal status that Wolsey has built up for himself, and to introduce King Henry to his future wife and the future mother of Queen Elizabeth I, Anne Bullen.
The two themes inter-relate because we later find out that Wolsey is scheming for Henry to marry the sister of the French king, in order to cement the alliance agreed at the Field of the Cloth of Gold. Thus, Wolsey does not support the marriage between Henry and Anne. In terms of the grand purpose of this play, which is to celebrate the birth of Queen Elizabeth I, Wolsey is on the 'wrong' side and so is doomed to fall. This is reinforced by the lengthy gibe at outlandish French fashions at the beginning of scene 3. Queen Elizabeth I always boasted that (unlike her half-sister, Mary I, the daughter of the Spanish Queen Katherine) she was thoroughly English-bred. Here, Shakespeare has the nobles put forward an anti-French and nationalistic point of view. However, it cannot be assumed that this was Shakespeare's own view, since most of his plays show a truly cosmopolitan fascination with the fashions, culture, geography and mores of continental Europe. Even in this scene from Henry VIII, the nobles' mockery of French fashions is good-natured and displays a detailed interest in, and knowledge of, the subject.
It is implicit in these scenes that Wolsey, a churchman, has over-reached himself in status and has become unfittingly worldly. Churchmen (especially after Henry VIII made himself head of the Church of England, independent of the Catholic Church and the Pope, in 1535) were expected to be humble, abstemious and plain-living people, known for their wisdom and holiness. Shakespeare's Wolsey, on the other hand, is known primarily for throwing lavish parties with rich food, drink, dancing and beautiful women. Like the king, Wolsey lives in a palace, and also like the king (in Act 1, scene 2), he sits on a throne of state. The fact that we have already seen the king sitting on his throne, and now we have seen Wolsey sitting in his, plants a suggestion in our minds that Wolsey aspires to royal status. In a low-born "butcher's cur," people of Shakespeare's time would have seen such raw ambition as a violation of the laws of nature - kings were determined by ancient royal bloodlines and appointed by God himself - as well as potentially treasonous. Significantly, at his party, Wolsey is careful to surrender his own chair of state to the king, but there is a foreshadowing of danger in the possibility that Wolsey will not recognise the disguised king.
Shakespeare introduces subtle pointers to the inherent wrongness of the spiritual leader of a nation becoming famous for his worldly qualities and trappings. In Act 1, scene 3, line 60, Sands, talking of Wolsey's great wealth, notes that if he were mean with his hospitality, this would be "a worse sin than ill doctrine." The sin of a man of the church would indeed be "ill doctrine" - incorrect theological beliefs - but Wolsey has crossed over into being a rich man of the world, in which case the only sin he could be guilty of is meanness. In scene 4, Sands' suggestive banter about the attractive women present would suit the worldly atmosphere of the court, but would be inappropriate in the house of a deeply spiritual churchman - which Wolsey clearly is not. Wolsey's invitation to his guests to "take their pleasures" would almost fit in the mouth of a brothel-keeper.
The most overt condemnation of Wolsey's lifestyle is the king's barbed comment, "You are a churchman, or I'll tell you cardinal, / I should judge now most unhappily." The genial surface meaning of the king's comment is that Wolsey's status as a churchman means that he is above reproach, even while he holds a party stuffed with beautiful women. The more threatening underlying meaning, of which the king may or may not be aware, is that Wolsey is not a true man of the church and deserves to be judged unfavorably for betraying his sacred office.