Guenever dresses up when she first sees Lancelot, wanting him to still see her as beautiful, which, of course, he does. They are a little awed by him, since they think he has seen the Grail, but he tells them he was not allowed to see it. He says that Galahad is now the best knight in the world, and when he found this out, he became totally miserable. Then he realized that he was only miserable because he himself had set such a great value on being the best knight. He decided to confess all his sins.
In telling the story to Arthur and Guenever, he makes clear that he even confessed his affair with the Queen. They realize that he is about to finally confess to Arthur, and Guenever won't accept this. Lancelot knows it is now or never, but Guenever clearly does not want him to tell Arthur. He hesitates but goes on with the story, telling them that he learns that his other great sin was pride-he loved being the greatest knight in the world so that he could show off. Once he gives up this sin, he is still beaten by another knight. Guenever doesn't understand and thinks God is still punishing him even though he has repented, but Lancelot is simply happy to finally have given up his pride and become more holy.
