Panel 1: It isn’t necessarily obvious here, but the artist, Ms. Hira Manish, is sketching what is under the tarp in the background. We will learn slightly more about her in the back-matter for this chapter.
Panel 2: The speaker is Max Shea, missing writer. Shea’s remark that he is “admiring the coast of mosquitoes and daydreaming about getting back to the mainland” is important. It obviously means these people are on an island. The significance here is that they are on the island Eddie Blake saw, the island – and, more importantly, what he discovered there – that sent Blake, in a drunken stupor, to Moloch to confess. Blake discovered the conspiracy put in motion by Ozymandias. It overwhelmed him, and, ultimately, it was this knowledge that got Blake killed.
Note that the tanker ship in the background has a pyramid symbol on its prow, communicating to us that Adrian Veidt, Ozymandias, is somehow involved with this as well.
Panel 4: Of course, the story that Shea is reminiscing about is the pirate story the young boy from the newsstand, Bernie, is reading – the same one we readers have also been reading.
Panel 5: This seemingly throwaway line: “…that sequence where the young chew their way out of their mother’s womb…” is actually important to the overall story of Watchmen, and its significance will be revealed in the final chapter.
Panel 6: Shea’s final bit of dialogue in this panel – “…let’s give the tyke a final once-over…” transitions directly into