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The game begins with Dr. Watson arriving at 221B Baker Street in London. Summoned by Sherlock Holmes' landlady Mrs. Hudson, Watson finds Holmes in a miserable state until they read the morning paper and discover that the Crown Jewels have been stolen. Shortly thereafter Mrs. Hudson introduces the pair to a "visitor" who gives them a paper that has several clues on it. Each clue points the player in the direction of a gem (Ruby, Sapphire, Emerald, and Opal). Watson and Holmes work their way through several London landmarks (Westminster Abbey, Big Ben, London Bridge, Madame Tussaud's, Trafalgar Square) solving puzzles and ultimately acquiring these gems. They also receive a carnation in Covent Garden for helping a woman who's passed out.
With them in hand they head to the Bank of England and with Wiggins help gain entrance to find the Topaz. After Watson found the Sapphire Holmes gave him a signet ring in case something bad happened to him. When Watson and Homes exit the bank Holmes is kidnapped. Watson takes the ring to Holmes' brother Mycroft as instructed who gives Watson the password to enter the Tower of London. Here Watson, with Wiggins' help, enter the Tower and find the Garnet.
Each gem found has a small etching on it with a clue. Putting those all together leads Watson to the Bar of Gold where the final showdown with Dr. Moriarty occurs. Watson finds Holmes tied up, but ends up defeating Moriarty and recovering the jewels.
Sherlock is an interactive fiction game so all character interaction is done via the keyboard. Simple text commands are given to control what Watson does: PICK UP PAPER, for example. The parser was quite good for its time, but pales in comparison with more modern interactive fiction games. The focus of the game is to search for the jewels Moriarty has hidden around London and use the clues on them to find him and recover the Crown Jewels.
Similar to other adventure games of the time there's a points system whereby points are awarded for certain actions. There are 100 points available in the game, but it's possible to beat the game without getting the full 100. The number of points received award a particular rank.
Unlike many other interactive fiction games of its era Sherlock had a fully implemented time system. Every action performed would take up a certain amount of time and many of the puzzles were centered around being in a particular area at a specific time.
Infocom was famous for putting extras in the boxes for their games. Sherlock came with a map of London, a copy of "The Thames" newspaper, and a key fob.