Summary
The two characters in the chapter title continue their chat from last week. Naruto seems unsurprised to learn that Ashura's chakra reincarnated into him, having apparently felt it when he met Sasuke after the Kage summit. Naruto correctly states that Sasuke carries the older brother Indra's chakra, then asks the Sage about the previous incarnations, who are (unsurprisingly) revealed to be Hashirama and Madara.
The reincarnations.
The Sage explains that Madara mixed Indra and Ashura's chakra when he grafted Hashirama's cells into his wound, and that this is how he was able to obtain the Rinnegan/strength equal to the Sage. [Note: There is a difference between the two translations regarding who made the Uchiha tablet: Mangapanda says the Sage made it, Mangastream says it was Indra/his successors. I'm assuming mangastream is right here.] He goes on to explain how his mother Kaguya was so incredibly powerful that it drove her mad, and that the same thing has happened to Madara. It's also implied Kaguya --using the Sharingan and Byakugan -- used a version of Infinite Tsukiyomi on the populace.
Kaguya and her literal third eye. Note that it is the same as the Juubi's.
We learn a little bit more about the Infinite Tsukiyomi: it's basically The Matrix, but with a giant tree instead of robots. Everyone will be attached to the roots like batteries while they're in perfect dreamland, and when all the chakra in the world is restored to the tree a new fruit will grow.
The reality of Infinite Tsukiyomi.
Shukaku, Hachibi and the Yin Kyuubi make a brief appearance and tell Naruto that Obito saved him.
The Sage asks Naruto what he would do after this battle, to which Naruto answers he wants to protect his friends. We see that due to the nature of time-travel, the Sage has been having the same conversation with Sasuke. Satisfied with their answer, he gives them their next shonen power-up.
Power-up time.
Meanwhile in the outside world, Madara is battered but gleeful. As Evening Elephant didn't work Gai prepares to try another attack called Night Moth.
My Thoughts
Reincarnation. Now, I'm no expert on the subject, but it seems to me that Kishi is using this concept quite loosely. As I understand it, reincarnation is the same soul being reborn. If this were the case here, how could the two different generations of Indra & Ashura reincarnations be walking the earth at the same time? Chakra is defined in-universe as a combination of physical and spiritual energy and so I believe that's what's been cycling through lives attaching to different souls.
Naruto sensing Ashura's chakra way back when: Seems random to me, but whatever.
Moon symbolism: Someone pointed out to me that this full moon/crescent moon thing has been around since part one. When Sasuke leaves Konoha there's a crescent moon, and the full moon on the night of the Uchiha massacre could symbolise Itachi choosing the Will of Fire.
Kaguya: Her third eye is kind of gross, though not unexpected and I predict that if Madara gets another Final Villain Form, he's going to have this... I'm confused as to what relevance the Byakugan has. In part one Kakashi said the Sharingan mutated from the Byakugan, but when we learned the Uchiha-Senju history this no longer seemed right.
Madara's plan: When someone loses all their chakra, they're supposed to die. So if the God Tree takes it all to make a new fruit, is everyone going to die, or will it keep them alive? The second option seems more likely and less mwhaha-moustache-twirling-villainous, but this also means everyone attached to the tree would basically be alive (but sleeping) forever. And unless he wants to be forever alone Madara would also need to sleep and join them in the illusion after eating the fruit (which I suppose he needs to control everything properly).