Hugo is caught stealing mechanical parts from the toy shop in the trainstation, and his book is taken away by the old man, and Hugo runs away.
Hugo returns to his home, between the train station walls, repairs the stations clocks. he revels a mechanical man his father started to repair from a museum before he died.
After Hugo finds out the old man's daughter (he is the godfather) has the key to make Hugo's father's invention work, when it does it draws a picture of a moon with a face that is hit in the eye with a rocket ship, then signed in the girls godfather's name.
After discovering what the automaton could write, they investigate at the girls house, where a stash of old papers and drawing are discovered of the old mans old work. The old man is seemingly haunted by old memories, and becomes sick
Hugo goes to the film history library, and finds out that the old man used to create the first movies, and was the first to incorporate camera tricks into his films. Hugo invites the president of the library over to the old mans house to meet the old filmmaker
The president of the library comes over and brings a projector (the microscope). Hugo then brings the mechanical man to the house, and everyone starts to watch some of the old movies. The family is fuctional again, and no secrets are kept.