Tanya Roberts played Midge Pinciotti for 3 seasons, but had to leave the show to take care of her terminally ill husband. Thus, her character was written to leave Bob and move to California.
Near the end of the episode, when Eric and Donna are folding Midge's clothes, Donna pushes Eric's head away and then Eric does the same to Donna. This is a nod to the pilot (S1E1) when they did the same thing on the basement steps.