The Third Gentleman comes in to tell Montano and two other gentlemen that a storm has wiped out the Turkish fleet. There will be no war on the island of Cyprus. He knows this because Cassio's ship made it to the island and told them what happened.
News lads! Our wars are done.
Desdemona and Emila are having fun while asking Iago what he thinks about "different" types of women. Desdemona asks both Iago and the perfect woman. Iago reply is they would only be good for raising kids and taking care of the house. We do not know if Iago is telling the truth because he said he is not who he is.
To suckle fools and chronicle small beer.
Iago is talking to himself about his brilliant plan. He is going to make Desdemona and Cassio fall in love, which will make Othello jealous. Othello will demote Cassio and go mad, and for this, Iago will love Desdemona. He is very happy that his plan is happening without any interference.
That Cassio loves her... she loves him... Now I do love her too not out of absolute lust but partly led to diet my revenge.
Iago tells Montano that Othello puts a lot of trust into Cassio, who is very drunk right now. Montago asks if Cassio is always like this. Cassio replies that Cassio needs to drink to be able to sleep every night. Iago did this to make Montago question Othello's judgement as his righthand man
'Tis evermore the prologue to his sleep.
I fear the trust Othello puts him in.
But is he often thus?
Cassio is very drunk right now and has drawn swords with Roderigo. Montago restrains Cassio but Cassio tells him if he doesn't let him go he will hit Montago. Cassio does not outrank Montago. When Iago heard this, he tells Roderigo to tell the town about this mutiny. Othello demotes Cassio and Iago's plan is working piece by piece.
Let me go, sir, or I'll knock you o'er the mazard.
Away I say! Go out and cry mutiny.
Othello just ripped of Cassio's lieutenant badge and Cassio is devastated. He has realized the consequence for his actions. He rants to Iago about how being Othello's lieutenant is his identity and his reputation. Cassio is willing to do anything for his lieutenant position back and Cassio will use that for his master plan.