Originally Posted by lokar
1. Season 3 ender: After much buildup, Peter plugs into the machine specially designed for him to stop the breakdown of our universe and the Redverse with the cool blimps. Peter vanishes.
2. Nobody knows who Peter is and the universes seem to have reached some kind of peace accord and help each other out, although lingering mistrust remains. The timeline has been altered by Peter's machine usage and Peter in both universes apparently died young.
Blue Peter died the same as ever. Red Peter (our Peter) drowned in Reiden Lake after our Walter took him, when the Observer declined to save him from the ice.
The creation of the bridge between the universes has stopped the ongoing erosion in the Redverse, which has stopped the war. Walternate is more occupied by Jones' shapeshifters infiltrating his DOD than anything happening in the Blueverse.
3. "Traces of him remain", as I remember an Observer saying, and Walter starts going crazy since he starts seeing Peter everywhere. Also Jones is kidnapping people, using shapeshifters and causing all sorts of trouble with his cool explosive rock he is mining.
Yes, but I don't know why these things are grouped together.
4. I don't know what happened but Peter is back.
5. Peter is understandably confused by his new timeline. Allegedly his influence magically makes Olivia forget herself and revert to Peter's old Olivia instead. This part makes even less sense to me than anything previously.
Peter believes that he is in an alternate universe (the Amberverse), where everything is mostly the same as the original universe (the Blueverse) except he never existed. Peter has been trying, until the revelation at the end of A Short Story About Love, to get home to the Blueverse and his Olivia.
What did I mess up? I think a key thing I missed is how Peter came back from the netherworld, although how did he even get to the netherworld if he died?
I wouldn't say he died. He was erased from existence due to the change in history. Despite the new timeline, the Observers noted, as you point out, that "traces remain." September was then instructed to purge those traces from the timeline. He chose not to, and so Olivia's bond with Peter eventually grew strong enough to will him back into full existence.
The likely explanation for this (or as much of one as we're going to get) came in The End of All Things when they were using the video recording from Olivia's apartment and explained it as a palimpsest. The idea is that the new timeline is written over the old one; peel away the top layer, and beneath you will find the former timeline.
According to September's theory from A Short Story About Love, basically Olivia's connection to Peter, perhaps combined with her cortexiphan/universe crossing powers, allowed her to strip the new timeline away just enough for Peter to bleed through. This makes sense given how Olivia's powers have always been triggered or heightened by Peter. Now that process has been heightened by his return, it's stripping away her Amberverse memories and returning her mind to its Blueverse state.
It remains to be seen how this will affect Walter, Astrid, et al, but there's still seven episodes left. Perhaps the process will continue until we're right back where things were at the end of Season 3. More likely, Peter and Olivia will find some way to create a hybrid Greenverse, in which they will enjoy both Peter's continued existence and the healing of the rift between Red and Blue universes that the machine was able to accomplish.