The faun hands Ofelia The Book of Crossroads, which include the instructions for how to complete the three tasks. After he disappears, Ofelia opens the book and is confused to find that there is nothing inside.
Meanwhile, we see Vidal taking out a shaving razor and shaving his face, then polishing his shoes. When Mercedes comes into his office, he tells her to cook some rabbits for dinner, even though she thinks they are too young to be cooked. He tells her the coffee is burnt, then invites her to try it herself.
Mercedes tells the cook that the coffee is burnt and that they need to get more meat in preparation for the arrival of the doctor's wife and the mayor's wife. Carmen calls Ofelia over and shows her a green dress that she has had made for her in preparation of the dinner party that night. Ofelia goes off to take a bath, but pulls the book that the Faun gave her out from a secret hiding spot. When she opens it, it fills with drawings and texts, a magical map.
As she examines a mark on her shoulder in the shape of a moon, the one to which the Faun referred earlier, her mother calls to her and tells her they should get ready for the party.
Ofelia emerges into the kitchen in her dress, and Mercedes takes her outside for some milk. As Mercedes milks a cow, Ofelia asks her if she believes in fairies. "Last night, a fairy visited me," Ofelia tells her. They are interrupted by Vidal, who takes Mercedes into a storeroom. There, she hands Vidal a key to the storeroom, and he tells her that in the future, he will keep the key himself.
Ofelia takes the book into the forest, reading it to herself. There is a story about a dying fig tree, which she finds in the forest. The tree is dying because a monstrous toad has settled near its roots and will not let it thrive and grow. The book instructs Ofelia to feed magic stones to the toad and procure a golden key from its belly. After removing her dress, Ofelia ventures inside the trunk of the tree in search of the toad, crawling through the mud.
The scene shifts to Vidal, who finds a fire burning in the forest, which indicates that approximately a dozen rebels were recently nearby. He also finds a small bottle of antibiotics, which indicates that someone has been bringing them medicine. He calls to the rebels, telling them they ought to retrieve their antibiotics and lottery tickets, before getting on his horse to go find them.
Meanwhile, Ofelia comes upon the toad inside the tree, and introduces herself as Princess Moanna. The toad roars at her, but Ofelia remains calm. She feeds the magic stones to the toad all at once, pretending that they are the insects that it regularly eats. When the toad swallows the stones, its stomach appears to erupt from its belly, and Ofelia grabs the golden key that is sitting on top. She emerges from the tree, but is distressed to find that her beautiful dress is covered in mud, as the sky opens up in a rainstorm.
The dinner party is beginning at Vidal's, and Ofelia is nowhere to be found. At dinner, Vidal unveils plans to distribute one ration card to each family. "We can't allow anyone to send food to the guerrillas," Vidal says, and pulls out the antibiotics he found at the camp that day. Seeing this, the doctor looks over at Mercedes with alarm, as Vidal makes a speech about the misguided beliefs of the rebels, who insist that everyone is equal.
Mercedes sneaks outside after dinner and makes a signal with her lantern in the direction of the forest. As she does so, she sees Ofelia coming out of the forest covered in mud.
Back at dinner, Carmen tells the group that Ofelia's father used to make the uniforms and that she met Vidal while working in his shop after he died. Vidal apologizes to his guests for Carmen's silly story, as Mercedes informs her that Ofelia has returned. When Carmen leaves the table, a man tells Vidal that he met his father briefly in Morocco, and that his men told him that General Vidal smashed his watch the moment he died in battle, so that his son would know the exact moment of his death. "Nonsense, he didn't own a watch," Vidal says.
Carmen is disappointed in Ofelia for dirtying the dress she gave her, and sends her to bed without supper. As Carmen leaves, the insect lands on the edge of the tub, and Ofelia tells it that she has procured the key and is ready to enter the labyrinth.
Ofelia descends the stairs into the labyrinth, where the faun approaches her and hands her a piece of chalk to take care of along with the key. "We'll soon be strolling through the seven circular gardens of your palace," he says.
The next day, Vidal opens the store room to the villagers, so they can collect their rations. A guard tells them that the communists lie to the villagers, as in a united Spain, everyone gets daily bread.
In the bathroom, Ofelia examines the book again, hoping for clues about her next task. The book fills with red the color of blood, and Ofelia closes it, frightened. When she goes into the next room, she finds her mother, bleeding profusely.
Captain Vidal's fascist political affiliation is reflected not only in his violent outbursts, but by his obsessive sense of order. Many times we see him meticulously cleaning or maintaining the material objects in his life. First we see him cleaning the inside of a pocket watch, then shaving his face intently, then polishing his boots. Aside from locating and exterminating the republican rebels hiding in the surrounding woods, Vidal is most concerned with the order of his personal life. Director Guillermo del Toro uses Vidal's compulsive tidiness and sense of order to represent his unforgiving and often ruthless politics.
The film is a fantasy, akin to classic fairy tales, yet rather than completely immerse the viewer in the fantasy world, it weaves in and out of fantasy and reality. No sooner has Ofelia found herself in the labyrinth, tasked with a supernatural endeavor, than the film returns to Vidal's household, and the staff's preparation for the arrival of the doctor and mayor's wives. In this side of the story, the servant girl Mercedes becomes the protagonist, as she seeks to navigate the mercenary and unpredictable world of Vidal's household, often taking the brunt of his dissatisfaction.
The magical sequences in the film are often awe-inspiring, but have an unsettling and uncanny quality to them as well. For instance, when Ofelia must go into the tree to retrieve the golden key from the toad's belly, she must climb through mud which is teeming with beetles and insects. Furthermore, when she feeds the magic stones to the toad, its stomach erupts from its mouth in a terrifying and viscerally unsettling display. The fairy tale elements of Pan's Labyrinth have a rather disturbing quality; they are not the charming images of Walt Disney, but the eruptive and unsettling images of more classical mythology and fables.
As she becomes more immersed in the fantastical world upon which she has stumbled, Ofelia becomes less and less concerned with the requirements of the military world into which her mother is marrying. She is unfazed by her mother's disappointment in her dirty dress, knowing that she has a task to fulfill in the labyrinth. The world of the labyrinth allows her an escape from the mundane reality of society and the world her mother has entered, and as Carmen tells her she is disappointed in her for dirtying the green dress, Ofelia can only smile, considering the adventure she has ahead of her.
Yet, try though she may, Ofelia can never fully escape the adult world. When she looks to the magic book for clues about her second task, it fills with red the color of blood, which parallels the bleeding of her mother in the next room. Just when she is ready to experience another magical instruction, the trauma and horror of the real world—of illness, grief, and fear—interject themselves.