Dr. Manhattan, Silk Spectre, Night Owl and Rorschach all discover Adrian Veidt was behind everything, killing the Comedian and hiring the assassin for the attempt on his own life (of whom he then forced the suicide). He was working through a subsidiary of his called Pyramid Industries - Moloch and Janey Slater also worked for that company, without knowing its secret, and that's how he gave them cancer, in order to make Dr. Manhattan fear he was causing it and leave the planet.
They confront him and he explains it's all necessary in order to prevent the Watchmen interfering in his plan to prevent nuclear war and save humanity. The reactor he was working on with Dr. Manhattan generates enormous power - he plans to use that power to cause massive explosions in cities worldwide, killing millions in order to save billions. Because the reactor is based on Dr. Manhattan's abilities, the world will believe he caused the destruction in order to prevent nuclear holocaust, and unite in peace. They tell him he can't do such a thing, whereupon he reveals that it's already happened - we then see the final explosion in New York.
Although horrified, they realise that they can't reveal the secret without destroying the peace that does indeed emerge - except Rorschach, who refuses to compromise, even in the face of Armageddon. He knows this will force Dr. Manhattan to kill him, but sticks to his position, so is killed in the snow outside Veidt's base. Night Owl and Silk Spectre return home, while Dr. Manhattan decides to see other galaxies, and says he may try creating life.The final scene reveals that Rorschach sent his journal, which details Veidt's guilt, to a newspaper - debating what to fill the space with, the editor tells a journalist "run something from the crank file - I leave it entirely in your hands", and the journalist's gaze falls upon the journal...
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