Mercy is something that can be sought or offered. For those who seek it, mercy is often asked for at some tipping point where vulnerability has been exposed or the order of things simply cannot be sustained and change is required. For those who offer it, mercy is a powerful weapon. It can be denied, resulting in total submission and capitulation by the weaker party, or it can be wielded with grace, releasing the person seeking it from further damage.
Unlike other seasons, where the penultimate episode had major plot development , The Quality of Grace pulled its shock value punch. Oh my god, they DID NOT kill Kenny, the yahoos at General Motors only clipped him, but a man on the verge of being a father for the first time cannot risk that the next time a drunken client discharges his weapon, all Ken will get is a face full of buckshot and an eye patch. An account man who cries uncle may have reduced his chances of landing a corner office, but Ken's request for mercy is granted, in part because Pete, whose dorsal fin is far higher (and sharper) than Ken's, has little to live for - he is separated from his wife and his daughter is practically a stranger. and thus, can handle the predations of a client as prominent as GM.
The hand off to Pete is also okayed because the partners have grown comfortable with up and comer Bob Benson. But any question that Pete was repulsed by Bob's advance is quickly removed as he employs Duck Phillips to get Bob out of his (thinning) hair. When Duck does some digging into Bob's past, he discovers Bob's deeper secret, not his homosexuality, but rather, that his entire CV is bogus - the schools he went to, the places he worked, the jobs he held, all made up out of whole cloth. The mirroring that has been so prevalent throughout this season again came through here, both between Pete and Duck  and Pete's decision to keep Bob's secret.  Pete's show of mercy was not without cost to Bob, who was told the lone condition of Pete's decision to not betray Bob's confidence was that Bob had to cease his romantic interest in Pete.
Bob having a secret life naturally draws comparisons to Don's checkered past, but I think this interpretation is a bit too facile. Don's reinvention was the direct result of a need to walk away from a prior life. We simply don't know enough about Bob's backstory to say the same. Whereas Don might have been underhanded in the way in which he secured his job at Sterling Cooper , he was actually a copywriter (albeit one "in house" at a fur company). Bob, on the other hand, is more like Cosmo Kramer, who famously showed up to Brant Leland and ingratiated himself to his co-workers but without having any skills appropriate to the office. 
Meanwhile, when the first and last image we see of you is your being curled in the fetal position, things clearly are not well. Don is now being shut out by Sally and he has blocked Megan out as he stares blankly at the television screen. His morning starts with a vodka-fortified glass of orange juice and he reflexively reaches for his trusty Canadian Club throughout the day. Don tipped his hand that it is emotional intimacy he craves more than physical closeness  and the only people he has gotten that from are now dead (Anna), won't speak to him (Sally) and have fallen for another man in the office (Peggy).
Don's visceral, and highly negative reaction to Peggy and Ted's flirtation was that of a jilted lover, that her transference of platonic affection toward Don to romantic affection for Ted is a betrayal far deeper than casual infidelity. The eye is constantly drawn to any scene involving Peggy, Don and the intimate space they share. Pregnant in any interaction between mentor and student is that Don and Peggy forged a bond years ago that ties them together in ways that are deeply personal, almost co-dependent. Don has spent much of their "reunion" time trying to steer Peggy away from her infatuation with Ted by explaining to her that he is not all she has him cracked up to be, while Ted acts like a lovesick puppy dog, jeopardizing an account by tripling the budget for a commercial simply to please the object of his affection. Of course, he also dangles his own affection just out of reach, dipping his toe in the water, but refusing to jump in with both feet.
Even in his addled state, Don recognizes the risk Ted and Peggy have taken with St. Joseph's, but instead of hanging the two out to dry, Don pulls a vintage "Don Draper," explaining to the client that their desire to run the commercial was an homage to the last advertising pitch made by the now-deceased Frank Gleason. And while Don may have also had ulterior motives in pulling Ted and Peggy's chestnuts out of the fire, Peggy slips the dagger between Don's ribs after the meeting, calling him a "monster" and storming out of his office, his attempt at explaining himself (and warning her off of Ted) having fallen on deaf ears. And of course, Peggy is right, Don *is* a monster. Much of this season has been about Don cruelly snuffing out any happiness that others might experience - either subversively (emasculating the good hearted Dr. Rosen by shtupping his wife) or directly (essentially calling his wife a prostitute for acting in "love" scenes on TV), but a whole episode since he promised to "lower his weapons" at Ted, he gutted the poor man like a fish in front of a client and crushed the spirit of his once promising protege. That Don immediately curls into the fetal position after Peggy insults him suggests he knows just how far he has fallen too.
Finally, Sally, although a young teen, wisely sidesteps seeking mercy, and instead crafts an exit strategy for herself from her overbearing mother and her now estranged father. Life at boarding school may simply be a "Total Draper Move" of beating a strategic retreat while more favorable options present themselves, but Sally has seen enough of the adults in her life to know that whatever trials and tribulations she may experience with the "mean girls" at Miss Porter's School, they cannot be worse than the monsters she lives with. Mercy is asked for when you are ready to give up; Sally decides to forge her own destiny.
And so we are left to await a finale in which the TV Guide preview only says, "Don has a problem." You don't say.
1. Lane Pryce's suicide (Commissions and Fees, Season 5, Episode 12), SCDP teeters on the brink of failure after Lucky Strike pulls its business (Blowing Smoke, Season 4, Episode 12), JFK is assassinated and Betty tells Don to move out (The Grown-Ups, Season 3, Episode 12), Don confesses his sins to Anna, Duck negotiates the sale of Sterling Cooper to PPL (The Mountain King, Season 2, Episode 12), Pete tells Bert about Don's stolen identity (Nixon v. Kennedy, Season 1, Episode 12).
2. When Duck negotiated the sale of Sterling Cooper to PPL, he offered to make Pete Head of Accounts. Pete stabbed Duck in the back and warned Don about Duck's power play, allowing Don to trump Duck and have him removed. Meditations in an Emergency, Season 2, Episode 13.
3. Faced with a similar choice in Season 1, Pete tried to leverage his knowledge into a promotion. When Don called his bluff, and Pete told Bert Don's secret, Bert gave Don permission to fire Pete. Don chose not to. Nixon v. Kennedy, Season 1, Episode 12.
4. After getting Roger drunk at a pre-lunch cocktail hour, Don simply shows up to the office the next day, claiming Roger had offered him a job. Waldorf Stories, Season 4, Episode 6.
5. The Bizarro Jerry, Season 8, Episode 3.
6. The Better Half, Season 6, Episode 9.