Warning! Contains major SPOILERS for The Handmaid's Tale season 3.
Hulu's The Handmaid's Tale's third season, finds Aunt Lydia reflecting on the past while dealing with issues very much in the present.
In the current storyline, The Handmaid's Tale picks up after the death of s and June's attack on Ofmatthew, with Aunt Lydia singling June out for being responsible for the execution and putting her in the center of a shame-circle. Later, we see Aunt Lydia discussing how, despite her best efforts, she cannot make a breakthrough with June and that she's a bad apple.
In the flashbacks, meanwhile, we learn that Aunt Lydia was an elementary school teacher by the name of Lydia Clements prior to Gilead taking over the United States. She was already a devout Christian back then, but what The Handmaid's Tale is most interested in exploring here is her loneliness and also just how much she cared for her students. We hear that she was married, but it didn't work out, and that she practiced family law before becoming a teacher.
Lydia becomes particularly concerned for one of her students, Ryan, whose mother Noelle just gives him snacks for lunch, arrives late to pick him up, and feeds him a diet of fast-food. Her caring manner leads to her inviting the pair to her house for dinner, where they eat Lydia's famous chilli, and she begins to develop a bond with them, which leads to the trio even spending Christmas together, and Ryan calling her Aunt Lydia. Noelle helps Lydia apply make-up for a night out, and tells her about her dating life, including the fact she is pursuing a married man with two kids of his own.
On New Year's Eve, we see Lydia go out on a date with Jim, the Principal from her school. They have dinner, sing karaoke, and begin making-out back at her place, but when she attempts to take things further he rejects her, since it's still too soon after the death of his wife. This is where things begin to take a turn from Lydia Clements to the Aunt Lydia fans of The Handmaid's Tale are so familiar with. She smashes a mirror, and then decides to call the authorities on Noelle to have Ryan removed from her custody, because she is an unfit mother, citing the fast-food, unwashed clothes, and her love life.
The background context to this is important: this would've been when the fertility crisis was already starting to happen, and so Lydia - who was childless - saw a mother who was unappreciative of her child and one of the "corrupting influences" she hates so much. It's also tied to her own self-loathing and inner-sadness. She doesn't lash out at Noelle until she's been rejected; she breaks the mirror after the makeout session because her anger at others is reflected by her anger at herself. So when she punishes Noelle, or June, it's in-part born from a need to punish herself as well.
This then explains Aunt Lydia's relationship with June, which is a key part of The Handmaid's Tale. It's quite clear that Lydia sees a lot of similarities between Noelle and June: the latter was late to pick her child up when she was sick and reprimanded for it, and both went after married men. Everything that Aunt Lydia loathed about Noelle she now sees in June, believing them both unworthy of the precious gift that is a child and both corrupting influences on those around them. It's unclear what has happened to Noelle since but, based on what we've seen with June, it's very likely that she too was turned into a Handmaid once Gilead took control.
The Handmaid's Tale's dive into Aunt Lydia's past highlights the complexity of the character and how she really did once care for people, especially children, and still does in her own twisted way. At the same time, it's questionable whether the rejection by Jim is really enough of an explanation for such a fascinating character. It's also unlikely to garner too much empathy for a character who has been a part of so many of The Handmaid's Tale's most abhorrent acts.