Welcome to an important issue for many reasons. Show writer David Fury steps in to give us not only the origin story of Sunnydale, or Happydale/ Sunny Acres as it was almost called but also the first chronological appearance of Richard Wilkens AKA the Mayor.
In this tell a slayer comes to a town full of vampires and slays them while looking for the vampire who killed her watcher. The vampire was a young girl who hates herself for being half white and strikes out against the white man. She fights with the slayer and is bested by her, turning to dust in the process.
All of this is told to Wilkens who is buying the land to build a new city. Why is this land so important? Well it might be the hellmouth underneath it. I'm just saying, having a gate to hell might be a big selling point for a man who would go on to become an old one himself.
It's a cute story that sets up a lot of the universe that we know. It tells an important part of the back story without feeling like that is its whole purpose or that it is even doing it at all. The story itself is so good that even if you don't know about Season 3 or the hellmouth you would still enjoy it.