The incident with the butterfly bombs was set in a peaceful rural village in this episode. It was based on a real-life event which took place in the port of Grimsby and which caused serious disruption in the town for a week while the bombs were being defused. The government imposed a complete news blackout so the Germans would not discover how serious the effect of their butterfly bombs was. The Germans did not drop butterfly bombs on any other town afterwards.
SPOILER: A "camouflet" is a underground chamber created when a bomb explodes but doesn't break the surface. The explosion creates carbon monoxide and other noxious gases, which is why Mulley is rendered unconscious and his mates are gasping and coughing.