The windmills are the most famous episode of the book: in chapter VIII of Part One, Don Quixote sees thirty or so outrageous giants where Sancho sees windmills, charges with his lance, and is knocked down by the sails.
The scene opens with the gentleman's description: "Look, my friend Sancho Panza, where thirty or so outrageous giants appear, with whom I intend to do battle and take all their lives." Sancho replies that those they see are not giants but windmills, and that what look like arms are the sails which, turned by the wind, make the millstone turn. The gentleman answers that it is plain Sancho is not versed in adventures, bids him say his prayers, and charges. Once knocked down, he already has the explanation ready for the disproof: the wise Freston, who stole his chamber and his books, changed the giants into windmills to deprive him of the glory of defeating them.
The episode sets the format of the whole book: two descriptions of the same thing, a squire who points out what is seen, and an enemy enchanter who explains the defeat without correcting the vision. It is the question that runs through the book: who decides what the scene is. The same structure returns in the flocks that are armies (chapter XVIII), in the fulling mills in the dark (chapter XX), and in the cage (chapter XLVI).
Outside the book, the expression "tilting at windmills" has passed into common use for someone who fights an opponent that exists only in his head. In the text, the scene is more ambiguous than the expression: the gentleman has the enchanter's explanation ready, and the book leaves it to the reader to decide whether he sees giants by mistake or by choice.