In this scene, Claudius is trying to calm down Laertes who is angry with Claudius for not having dealt with Hamlet for killing Polonius. After Claudius makes excuses for his lack of action (note the irony in that), he tells Laertes that he does, indeed, have a plan. Of course, Claudius has a much different reason for his plan than the one he gives to Laertes. While he tells Laertes the reason for the plan is because Hamlet killed Polonius and he is just helping Laertes get his revenge, the real reason for the plan to get rid of Hamlet is because Claudius doesn't want him around telling people the real manner of King Hamlet's death. Claudius then talks to Laertes about his prowess with a sword and builds him up. He convinces Laertes that the thing to do is challenge Hamlet. As the king is talking to Laertes about the plan, he continues to fan the flames of anger Laertes has toward Hamlet. After Claudius tells Laertes how, in this fight, they will work it out so that Laertes has a pointed sword instead of a blunted one and with that pointed sword, Laertes can kill Hamlet. Laertes, in his eagerness to accept this plan, adds that he will put poison on the end of the sword so that even a scratch will kill Hamlet. The king then says he will also have poisoned wine for Hamlet to drink when he gets thirsty just in case Laertes doesn't get the chance to cut Hamlet. Then Gertrude comes in and announces that Ophelia has drowned. This just adds to Laertes conviction that he must kill Hamlet.
Laertes and Claudius begin to plot the death of Hamlet. Hamlet has escaped Claudius' original plot to have him executed by the king of England in exchange for the relief of a debt. Claudius wantes very much to avoid the appearance of foul play, so he and Laertes create a plan in which Laertes will tempt Hamlet into a duel. Laertes' sword will be poisoned, so that he only has to nick Hamlet once to cause his death.
Laertes doesn't completely work as a foil, since he has not counteracted or contrasted with Hamlet for a significant duration of the play, but they "compete" for the love of Ophelia, and their climactic sword fight is the biggest source of dramatic tension in the play.