Solid Snake uses convoluted story elements and Japanese porn mags to confuse Shepard, he then uses this time to sneak behind Shepard and incapacitate him by cutting off his arm, Shepard then uses snake's own convoluted story elements against him, by sowing the arm of snake's brother and clone, liquid snake, on to himself, thus beginning the insurrection of Liquid Shepard!!
This lays rest to the confusion as to why the two were even fighting in the first place, and the two are reassured in the fact that the other is irredeemably evil and wrong. The two explode in a fury of hand to hand combat, the fight is broken by otacon who tries to shed some light on the situation by explaining some meaningless plot points, Shepard gets confused all over again, he then in anger spills snake's glass of water,
and then this happens.Hope that shed some light on the situation!