False Alarm
They saw a life-size human skeleton, but it was also fake. Someone must have planted it in the tree’s bark and forgotten it as a scare or prank for Halloween. They laugh in relief, but why Kyle would warn them about a situation like this is what they can’t understand.
A Sudden Realization
They were sure that Kyle was taught to differentiate the smell of non-threatening and menacing objects, which is why they were puzzled about why he acted as such. But then they realized something that clicked all of a sudden!