So. 'The Captain' refers to some sort of depraved sex act that Schmidt convinces Jess that it's the only thing that will get Nick off. His goal is to break them up and he figures that getting them to do something (use your imagination) will be just the trick to do that. Since we never hear exactly what it is...and of course this being TV, we never see it either, all we have left is our imagination. The only clues we get are a Pirate, racial slurs and a Spyglass. It's all meant to be a joke to force the viewer to come up with their own ideas. I couldn't. I was too busy laughing at Winston for being so oblivious to the fact that the hot blond with the cat wanted him and he still couldn't see it. Overall a very funny episode.