After surviving a game set up by both Jigsaw and his heir Hoffman, FBI agent Strahm investigates the history of the Jigsaw killings. At the same time, five people wake up in a room adjoining three others, each with a Jigsaw game in them.
The first room has them trying to get out of linked chain harnesses that will decapitate them if not unlocked. One does not survive. In the next room, only three keys exist that can open the hatches for protection from a bomb. One does not survive. Next, five surges must run simlutaneously to open the door. One does not survive. In the last room, the two survivors realize that all of them were connected through a real estate scandal that resulted in the deaths of 8 people. Not only that, but each game in the previous rooms was meant for all five to survive together; one key would have opened all the harnesses, two people could have fit in the hatches, and only small shocks were needed to open the doors, not one large one. In this room, 10 pints of blood are needed to open the door to the exit by, you guessed it, sawing through their arms. One. Does not. Survive.
On the other side of the story, Strahm's investigation reveals that Hoffman was recruited by Jigsaw even before the events of the first movie, because Hoffman made up a copycat game to get revenge on the person who killed his sister (seen at the beginning of the movie). Hoffman realizes that agent Strahm is onto him, and he manages to get Strahm's suprvisor, Agent Erickson, to follow Strahm's cell phone signal back to the Jigsaw lair. Strahm eventually makes it to a game involving a glass coffin. Hoffman ambushes him, and Strahm pushes him into the coffin. Hoffman refers to the tape recorder in the room, which plays back a message saying that if Strahm did not trust Hoffman, i.e. help him cover up the Jigsaw killings, he would dies in this room, and so he does, by being crushed by the walls, while Hoffman is safe in the coffin below the floor. Erickson finds Strahm's phone in a room containing all of Jigsaw's materials, as well as the rendering of the four trials to be faced by the five people. This makes it look like Strahm was the new Jigsaw all along, fully exonerating Hoffman of any blame. Hoffman will continue to play in Saw VI.