The TARDIS lands in London on Christmas Eve, 1851 and almost immediately the Doctor hears his name being called. When he meets the woman shouting for him she fails to recognise him and continues calling until another man arrives and claims to be the Doctor and acknowledges the woman, Rosita, as his companion.
The Doctor then attempts to help the newcomer lasso a man-size dog-like creature which has a cyber-mask, but it drags them both through the upper floor of a warehouse until Rosita cuts the rope, saving them both from plunging through a high window. The newcomer explains he has lost his memory, and the Doctor assumes he is a later incarnation, and follows him to the house of a murdered vicar, where the new Doctor says he is investigating the murder of the vicar and a teacher called Jackson Lake, and that his memory was wiped when he was attacked by the Cybermen.
At the house the Doctor finds primitive memory devices called infostamps and says they have been used by the Cybermen because of the lack of technology in 19th century London. Two Cybermen attack the Doctors, but are destroyed when the new Doctor sets off a feedback loop in one of the infostamps, something he said was the cause of his memory loss. The new Doctor takes the Doctor back to his base, in the stables of an Inn, and shows him his TARDIS, a balloon (Tethered Aerial Release, Designed In Style).
The Doctor finds another infostamp in the new Doctor's luggage, this one filled with information about him, and concludes that the new Doctor is really Jackson Lake, but his memory has been over-written with details of the Doctor's life by the infostamp, which itself may have been stolen from the Daleks. Lake's memory starts to return, and he remembers his wife being killed and his son being taken.
Meanwhile, Mercy Hartigan, a workhouse matron has joined the Cybermen and had them kill the vicar so all the local gentlemen would attend his funeral; she arrives with the Cybermen to select four of them (the rest are killed) so she can have the children in their workhouses (including Lake's son) as a labour force for the Cybermen, who are building a 'CyberKing' to rule Earth.
The Doctor is unable to stop the rise of the 200-foot tall CyberKing, which is controlled by a reluctantly-conditioned Miss Hartigan, but rescues the children. He then uses Lake's balloon TARDIS to get up to the CyberKing throne, where Miss Hartigan is held. He breaks her conditioning, and her human anger destroys the Cybermen. The Doctor uses the Cybermen's own time travel device to drag the CyberKing back into the Void, saving London. The danger over, Lake, his memory now returning, hires Rosita as nursemaid for his son and gets to see inside the real TARDIS, before insisting that the Doctor joins them for Christmas dinner.