First, the story is pretty unusual for Monkey, in that the threat of the week - The Spirit of All Great Snakes - is a relatively minor antagonist, who is only a threat to Tripitaka because Pigsy and Monkey have been separated from him by the consequences of Pigsy's actions.
It is actually the antics of Pigsy that takes up most of the episode. Having decided he wants to marry a rich widow they met on their journey, Pigsy has left the others to stay at her house. The widow, on the other hand, wanted to marry Tripitaka - who naturally refused this - and only accepts Pigsy as a worker, not a potential husband.
When Pigsy finally accepts this, he changes his appearance to that of Tripitaka.
This perfect disguise is foiled by one thing - Monkey. Monkey has put a spell on Pigsy so that whenever he has "rude thoughts" (Monkey's words) he will turn into a full pig. This is very amusing, and ensures that Pigsy can't have any success with the widow, disguised or not.
Actually, Pigsy was well on the way to ruining things for himself even without Monkey's interference, due to his complete inability to act anything at all like the saintly Tripitaka.
Unluckily for Monkey, while he is disguised as an insect to spy on Pigsy, he is hit on the head by the serving girl. The narrator sums up what happens next:
"The wicked go to hells, the good go to heavens, and the pure neither live nor ever die. But those hit on the head tend to fall unconscious. Monkey has lost his memory."
He is then found by some locals and kept in a cage for some free public entertainment, until Tripitaka - under threat of torture by the Spirit of All Great Snakes - uses the headache sutra on Monkey and causes him to get his memory back. After this he makes short work of the villain.
The second reason for this episode being memorable is the trippy effects during Monkey's fights with the villain at both the beginning and the end of the episode - they're not great or impressive effects (though pretty good by the standards of the series) but used well.
When the Spirit of All Great Snakes is defeated by Monkey, he turns into an animated green snake, slithers up into the sky, and then explodes like a firework.
Overall this is a very imaginative episode, and well worth watching.