New York has gone a bit odd. Specifically, it has been turned into a giant Ren Fayre, by the wizard Kulan Gath (who escaped from a piece of jewellery in #189), with the Morlocks as minions. Buildings, people. Outside, in DC, they're having a crisis meeting about this, as people in DC tend to do. Val Cooper is forced to put her faith in those people in brightly coloured costumes and capes.
But the heroes are affected, too. Well, most of them. Not Spider-Man, and not Warlock (making his first appearance in Uncanny only a few months after being introduced in New Mutants). Storm and Callisto are able to escape to New Jersey (not a phrase anyone uses much), and are contacted there by Selene, who has hijacked Rachel's powers, and wants to stop this madness as much as anyone else.
Together, those that remember anything persuade those that don't that Kulan Gath needs overthrowing, while they remain suspicious of Selene's motivations. And so the X-Men are included in that rallying call: "AVENGERS ASSEMBLE", and help defeat the evil wizard.
It's just the X-Men's luck that they were an essential part of the solution which winds back time so that none of this ever happened, and nobody remembers it. Not even Val Cooper, who was looking like she might be turnable. Captain America is going to remember it, though. Shouldn't he be doing something against this anti-mutant hysteria that's being whipped up? Mutants must lead the struggle, but they need allies, especially when they are in such urgent danger. Topical!