The first half of this book discusses the evolution and decay of the Sabbatai Zevi messianist movement: not just of its birth (discussed in more detail in Scholem's book Mystical Messiah) but also of its slow decay. (For readers unfamiliar with Zevi, a brief summary: in the mid-1660s, Jews throughout the world came to believe Zevi was the Messiah; after being threatened with execution by the Ottoman Empire, Zevi converted to Islam. Nevertheless, some Jews continued to believe in him until the 19th century).
Scholem proposes two possible causes for the survival of Sabbatianism after Zevi's apostasy. First, 17th-century kabbalah (the Jewish mystical tradition) saw Messianic renewal not just as a nationalist rebirth of a Jewish state, but as a more spiritual process transforming all of creation, ultimately leading to Messianic deliverance. Scholem speculates that kabbalism made it easier for Jews to trust their own personal experiences over historical reality; as a result, some Jews could not admit "that their own personal experience had been false and untrustworthy." Moreover, many Jews had left countries (most notably Spain) where they were forced to practice Judaism in secret; thus, they found it easy to believe that Zevi was doing the same.
Scholem also addresses the Sabbatians' split-up into multiple factions. "Moderate" Sabbatians continued to follow halacha (Jewish law) believing that they were bound to do so until Messianic deliverance reappeared. But more radical Sabbatians either followed Zevi's lead by apostasizing, and/or by secretly rejecting halacha (Jewish law). The radicals believed that since the Messiah had come, the commandments of the Torah were abrogated, based on the idea of a "mystical Torah" of absolute freedom predating creation. Some radicals even suggested that Zevi (or even later Sabbatian leaders) was an incarnation of God. But as the memories of Zevi grew fainter and fainter, Sabbatianism decayed; some Sabbatians assimilated into Christianity and Islam, while in the 19th century, others embraced secularism or Reform Judaism.
Like Sabbatians, Hasidim embraced mysticism. But they focused on individual redemption rather than universal social redemption, thus reducing the temptation to expect imminent messianic deliverance. Scholem also points out that both Sabbatians and Hasidim embraced the concept of leaders "descending in order to rise" into the world of the less-holy. Where Sabbatians saw the "descent" of their Messiah as apostasy or as violations of halacha, Hasidim saw their rebbes "descending" into the realm of the mundane by teaching and leading their flock (rather than engaging in solitary communion with the Divine).
Most of the last third of the book is less interesting than Scholem's essays on Sabbatianism and Hasidism; to a greater extent than the first few, they focus on issues which require a very high level of cultural literacy (such as a book review of a now-obscure book, or a discussion of Martin Buber's German translation of the Torah). A fortunate exception is Scholem's essay on the Star of David; he shows that the hexagram was not a purely Jewish symbol until the 14th century, when the Jews of Prague placed it on a flag (perhaps because its use on magical amulets was then common). The symbol did not spread to eastern Europe until the 19th century, when the emancipated Jews of Europe wanted to show their respectability by having a symbol in their synagogues as simple to understand as the Christian cross.