You come back to yourself in a foggy woods, on the edge of a clearing. Here you can see two men seated at a large table laden with all manner of foods- including a mammoth trunk and a slightly impressive collection of cheese. The two men are having a conversation at some length, one attempting to convince the other that there is nothing wrong. The other, Pelagius the Mad, seems most fond of twisting the conversation around to talk about spies, floggings, and attempts on his life.
The first, as it turns out, is named Sheogorath, and he turns his attention to you as Pelagius blorts out of existence in a spherical swirl of blue and black. Having been slighted about cheese somehow by the ruler four centuries dead, Sheogorath has dismissed him from the table. Sheogorath will gladly answer any number of questions you have (mostly incorrectly, just for the heck of it) and quiz you in return a little bit. He makes some bizarre suggestions as to what your name might be and why you are here (pay close attention, as the man is quite entertaining) and eventually explains that he is Sheogorath, Daedric Prince of Madness, but eventually the conversation can be led around to the topic of Dervenin, who wants his master back.
This prompts Sheogorath to get (slightly) more serious and a bit annoyed, but he will hear you out. Again the topic of conversation wanders (briefly, but very far afield, including threats involving a pickle at times) before Sheogorath agrees to end his vacation and leave. However, he will not do so just yet. First, he wants you to help him by reassembling Pelagius' mind.
You would likely gladly do so just to leave, using your wits and your inventory- but Sheogorath takes the latter away from you, swapping your clothes out for a set of nobles' clothing and your weapons for a staff by the name of 'Wabbajack'. You will find that you cannot change your equipment at all while you are here, though you can collect things from the table if you're so inclined.
Since punching Sheogorath is inadvisable and hitting him with the Wabbajack is a bit like pouring water on a lake in order to wash it away, you're going to have to go out to the three ancillary clearings, by the paths the large henge stones mark off.