Summary
A criminal gang is terrorising Gotham University, which now stands on the brink of closure.
It turns out this is the result of a new villian, The Scarecrow, who uses fear gas to terrorise his victims.


Highlights

Villians
Dr Jonathan Crane (former University Professor and owner of Crane Chemicals) takes on the role of the Scarecrow in order to take revenge on the university.
The Scarecrow is obsessed with causing fear in his enemies (or anyone else for that matter!) making use of various gases and toxins that send people into a fit of panic.
Scarecrows appearance changes repeatedly throughout the series, this first incarnation of his costume only appears in this episode. Personally, I like his look here, especially his weirdly thin limbs, but I think his look does improve over time (becoming, logically enough, scarier each time!)
As I child, I remember this episode stood out to me because (since I had only seen the movies and Adam West show, rather then reading the comics) I had never heard of the Scarecrow, so it was exciting to see a new villain challenging Batman.
The only problem with the Scarecrow is he is a bit of a one trick pony sometimes. He gets people with fear gas…and but that's about all he's got! Once you get past that, he really doesn't have anymore weapons in his arsenal.
Here he also has the nice touch of constantly berating his followers (Anthony and Nigel, he always calls them by their full first names in his Frasier Crane like voice) for their lack of intelligence and education, demonstrating his own arrogance.

Bat Crap Crazy!

In this episode….there was a LOT of crazy psycho crap!

Scarecrow lacks some of the inner turmoil of other Batman villains that will come later. He was bad from day one. He doesn't have a noble cause that he takes too far, he isn't forced by cruel circumstances. He is just a total dick.
He has a (very unhealthy) obsession with scaring others. Presumably this relates to his own arrogance, but perhaps also to a deep seat insecurity. He is scrawny and pretty ugly, so frightening people was probably a way to put himself on top.
This desire for dominance also comes through from his berating of his minions.
He got a job working at Gotham university but his dubious ‘experiments’ into fear became ever more twisted until the university fired him, forcing him out in disgrace. Arrogant as he is, Crane can see no fault on his part for this happening, and puts all the blame onto the university, which he then sets out to destroy. This seems to have been the final that snapped his already disturbed mind and caused him to adopt the Scarecrow persona.
Scarecrow is noticeable for his desire to spread terror and anguish rather then simply kill people. At one point he shoots bat man with a dart covered in his fear venom. If he had used a regular gun he could have killed Batman, but that the Scarecrow obviously has no interest in killing people, since that would give them release from their suffering. Later on, at a university fund raiser, he captures one of the universities top professors after spraying the room with his fear gas.
Before departing, he states that the professors suffering has only just begun, once again showing his desire is always to torment and frighten others, but not to simply kill them.
Scarecrow is basically a psychopath, unable to form human connections and seeing everyone else as inferior to him and his personal playthings that he has the right to abuse however he sees fit. His intellectualism is just an aspect of this sense of self importance, as is the way he smugly gloats over his victims, often pausing to admire his own handy work.
This makes it exceptionally satisfying when Batman not only out wits him but also exposes him to his own gas, which reduces Crane to a quivering wreck, grovelling for mercy from Batman. A fitting fate for this glorified bully! Unlike most villains, Scarecrow seems to have set no precautions in his lair and his gas is easily accessed. It seems safe to assume his arrogance and low opinion of the rest of humanity meant the idea of someone actually tracking his down simply never occurred to him as possible.

But Crane is not the only lunatic on parade this episode! Batman demonstrates some of the deep seated issues that led him to dress up as a bat and wear his underpants on the outside.
Early in the episode, a university professor insults Bruce Wayne as a worthless playboy, whose jet setting brings shame on his fathers legacy.
Wayne's parents are always a touchy subject and the remarks obviously get to him.
When Scarecrow catches him with his fear dart, the slow acting toxin brings Bruces fear of failing his parents (arguably the whole reason he is compelled to be Batman) to the fore, with the image of his father appearing and berating him.
A particularly excellent sequence has the reporter Summer Gleason on the television reporting the fact that Batman failed to stop Scarecrow and Bruce hallucinates the she is repeating the words again and again with increasing anger.
Batman fights for justice because he believes it is the only way to make things right after his parents death, so the idea that they would still view him as a dissapointment leaves him struggling to function.
This leads to a very nice scene where Alfred tells Bruce that he knows his father would be proud of him, because he is proud of him. What makes this bit great is that its not over played. Alfred is more British then tea and scones, with an upper lip so tough you could use it to draw a margin. Any display of tender emotions from his is rare, so when he does, it is very meaningful. He doesn't start gushing, or cry or give Batman a hug, that's not Alfred's style. He just says a few words that remind Batman that he is there for him. His words also hint at his role as surrogate father to Bruce. Basically, great stuff!
Batman eventually manages to over come the fear toxin (something Scarecrow himself proves utterly unable to do) and in doing so, reaffirms his belief that he is on the right path.
Of course, his issues are not resolved (they never can be) but he is back mentally to wear he needs to be to do what Gotham needs him to do.

A final mention has to go to Scarecrows minion Nigel, who is hit with a fear dart and reveals his own fear of returning to prison, shouting that the walls are closing in. They idea of the criminal having claustrobia after his time inside adds a nice bit of depth to a very minor villain.

GAS!
There is soooo much gas in this episode that Scarecrow might want to consider a gas mask in his future costume!
There is so much gas in fact that it comes in two varieties! Red from Scarecrows gloves, green the rest of the time! The difference between the two types is never explained, both seeming to cause the same fear responses.
Scarecrow gases a guard with his glove, throws gas bombs at batman (who wears a mask) gases people in the past in his back story during his ‘experiments’, gases a roof full of people at the fun raises, fires gas from his glove at the professor he kidnaps and THEN gets caught by his own gas at his base!
Phew! I hope that stuff doesn't have any long term side effects (though later episodes depictions of the Scarecrow imply that it might…)

Bullock Bonus!
I'm always happy to see detective Bullock, here he berates Batman after the Scarecrows initial escape, accusing him of helping of with holding evidence (true) and being a vigilante (also true!) He also makes a rather cutting remark about Batman being the commissioners “pet bat”.
He is made to eat his words at the end of the episode when he says he will bet his badge Batman and the Scarecrow are working together, moments before Scarecrow shows up hanging from the office ceiling fan!

Holy Shitty Moments Batman!
Scarecrows character design seems to make his neck a bit too thin, and I would swear his head is larger without his mask then with it on!
In one scene Scarecrows minions are wearing gas masks after his gas attack on the fund raiser but he does not. His mask cant contain a gas mask as is has an opening mouth hole. Perhaps Scarecrow was confident the gas had cleared (knowing a lot about it) but his minions decided better to be safe then sorry.
It also seems a bit contrived that Scarecrows minions seem to fall and land in (relatively) safe places during the final battle. I will partially forgive this due to the nice touch of Batman trying to grab one of them before he falls (its a small detail, but the consistency is good) and the fact that one of them took a dive out of the window due to fear toxin causing his to hallucinate, which is wonderfully twisted!

BLIMP!
The end battle takes place on top of and in the cabin of a giant blimp/air ship. It doesn't get much more awesome then that!

Summary
A good episode, with an interesting (if perhaps a little one dimensional) new villain and lots of powerful introspection from Batman about the value of his own mission.

Final Bat Score
3 out of 5

Dr Crane shall always be a second-rate villain. He doesn't have the awesome persona that many of Batman's other opponents wield, and he is truly a “one trick pony”. However, he is an important character because our hero ends up getting a whiff of that nasty fear gas so often when he's around. This brings Batman's deep seated fears to the surface for the audience to observe. Some of the most powerful imagery in the entire series are in episodes in which the Scarecrow is the main villain (Dreams in Darkness).

I suppose we could view Scarecrow as a sort of a walking plot device to that forces Batman to consider himself and what he does in a way we the viewers can visually appreciate. Not that thats a bad thing, as you say.
I think the makers of the series realise the Scarecrows limited nature and so dont make excessive use of him. The episodes he does appear in are all pretty solid.
But at the end of the day…he aint no Two-Face!

I eat up episodes filled with crazy mind-bending halucination sequences, so the Scarecrow's alright in my books!

He's better than the Mad hatter and that trap setting guy at any rate.

Ah yes, trap setting guy!
I assume you mean the one from “The cape and cowl conspiracy” who trapped people in death traps?
I look forward to talking about him.
He was sort of “diet Riddler”, so he most certainly deserves some scorn.

As for the Mad Hatter, I actually quite enjoyed some of his stuff in the series, as I think they gave him some really interesting angles.
And he always gets to say the classic quote “twinkle twinkle little bat, how I wonder what you're at!”