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THe chapter deals with before Silas came to Raveloe. It fills in some plot and context about how Silas was wrongly accused and excommunicated. This gives us a better understanding of Silas and his motivations for being a recluse.
The author's use of flashback is a form of foreshadowing. In chapter One we experience Marner's cataleptic fits and the way they have affected his life. He experiences betrayal, accusations, and loss because of these fits. These occurances mirror what it to come.