The TARDIS is taken by an antiques dealer named Edward Waterfield.  He lures the Doctor and Jamie into a trap in which they are taken back to Waterfield's time in 1867.  His daughter, Victoria, has been held captive by the Daleks to keep him subservient.

The Daleks use Jamie to 'rescue' Victoria in order to identify the 'human factor'.  This is the quality humans posses that allows them to defeat the Daleks.  The Doctor implants the 'human factor' into test Daleks and they become much more friendly.

Everyone is sent to Skaro and the Doctor soon finds that the real purpose of the Dalek experiments is to find the 'Dalek factor' and implant it into humans, making them more destructive.  The Emperor Dalek plans to use the TARDIS to spread the 'Dalek factor'.

The Doctor infuses more Daleks with the 'human factor' and a civil war erupts between the Dalek factions.  Edward Waterfield is killed and the Doctor asks if Victoria would like to join Jamie and him in the TARDIS.