(reviving dead thread)
Passion (although arguments could be made for Becoming Part 2 or Innocence)
Passion to me is the best episode ever of Buffy and therefore the best of Season 2. It is just a really dark episode, complete with the Angelus monologues and really wonderful photography and direction, which is a bit different then any other episode.
Aside from being dark, or actually in addition to, it has just some real dramatic moments from Jenny's murder, Giles finding her body, Buffy and Willow's reaction, and then Giles becoming all badass and failing.
Has some great lines, like Buffy yelling at Giles at the end.
I think it not only show & tells the fans how bad Angelus is, but also Buffy...and becomes the moment it truly sinks in for her that her boyfriend is gone and she HAS to kill him.