The third Holmes' brother was a pure sadist. Mr. and Mrs. Holmes did everything they could but, eventually, they had to protect Mycroft and Sherlock and ended up committing the other brother to an asylum. Sherlock was too young when they locked him up to remember the things that the third brother used to do, so when the brother broke out or managed to get released and came to Sherlock, saying he wanted a reunion, Sherlock thought nothing of welcoming him back into his life. And then the third brother kidnapped Sherlock and did things to him that left Sherlock a shell of his former self. Unable to recover, Sherlock turned to Mycroft, begging him to use secret government technology, advanced hypnosis, or really anything to help him forget what happened.

Mycroft couldn't erase Sherlock's memory of their third brother completely, as there were obvious signs of a third brother at the family home, but he could make Sherlock forget everything from the abduction on-wards. After the procedure is done, Sherlock was left with only the good memories of the third brother and tried to track him down. When it appears as if he disappeared off the face of the Earth, Sherlock assumes Mycroft is keeping him locked up somewhere and resents him for it. Mycroft puts up with this, knowing the alternative is much worse.

Then, something happens and Sherlock slowly starts regaining his memories of what happened.