Theon has been on a terrible roller coaster for the past few episodes. For a while there, it seemed like he was in a solid place, as Yara's chief adviser.
Then, Euron launched a devastating attack against their fleet, triggering Theon's horrible memories of torture and prompting him to abandon his sister.
However, Theon's story didn't end there. Now that it's been revealed that Yara is still alive, he's determined to save her from their evil uncle.
Before embarking on that quest, Theon made amends with Jon Snow. Their interaction highlighted the fact that Theon has truly come to realize how horrible his behavior was during earlier seasons. In order to actually lead others, he had to come to accept his failings, faults, and the reality that he is both a Greyjoy and a Stark.
Next, Theon faced a more daunting task — convincing the crew of the ship that rescued him, a bunch of hardened sea warriors, to accompany him on the mission to rescue Yara. He was roundly mocked and threatened for this request, but Theon pressed them, undaunted. He knew that actions were far more persuasive than words, especially to tough folks like the Ironborn.
So he picked a fight with the ship's captain. He fought until he was bloodied, and never gave up, despite the man's demands that he stay down. In the end, he wore the captain out and earned the respect of the Ironborn. The incident wasn't simply about proving his physical toughness — it was about demonstrating his true determination and grit.
While his quest to save Yara seems like a long shot, the brawl on the beach was still an impressive moment for Theon.