This scene brilliantly features the way that Iago taunts Othello with fears that are half-formed and preys upon the jealousy that he knows Othello already suffers from. Note the way in which he asks a seemingly innocent question, raising an idea in Othello's mind, and then overtly does his best to avoid talking about it again, in spite of Othello's demands that he share his concern:
Did Michael Cassio, when you wooed my lady,
Know of your love?
And it is this question that enflames Othello's jealousy. The way that Iago repeats the words of the questions that Othello asks him in particular drives Othello insane, leading him to suspect that Iago believes that something is going on between his wife and Cassio. Note what Othello says to Iago:
By heaven, thou echo'st me
As if there were some monster in thy thought
Two hideous to be shown. Thou dost mean something...
Iago never names his fears, but the way in which he raises his concerns causes Othello to think the worst. Such a subtle approach from Iago allows Othello to play right into his hands. Iago, because of his "love" for Othello and the confidence that he has, is able to win his ear and thus set the stage for the way that he poisons Othello's mind against Cassio and his wife.