The witches discuss when to meet with Macbeth but suggest that things aren"t what they seem. "Fair is foul, and foul is fair, hover through the fog and filthy air."
Macbeth has killed Duncan
The witches tell Macbeth that he will be king ("All hail Macbeth that shalt be king hereafter!") and tell Banquo that his sons will be kings ("Thou shalt be kings,though thou be none.")
Macbeth plots Banquo's murder
Lady Macbeth expresses her intentions in persuading Macbeth. She will go to any length on Macbeth's behalf to ensure that, if Macbeth loses his nerve she will make sure it is done. She is worried that he is too weak being, "full of the milk of human kindness."
Banquo's ghost appears
Macbeth has murdered Duncan and feels guilty over blaming the guards as well as killing king Duncan. One of the servants cried "murder!" in their sleep and Macbeth can't stop thinking about it whilst Lady Macbeth takes charge of the situation and tells Macbeth hes cowardly.
Macbeth plans to have Banquo murdered because he is concerned about the witches' prophecy that Banquo's sons could be kings. "Be innocent ...till thou applaud the deed" This confirms that Macbeth is proud of his latest scheme.
Macbeth sees Banquo's ghost for the first time and is in shock. Fleance, Banquo's son, is alive. This is important as it drives the plot and contributes to Macbeth's increasing paranoia.