Totally new to this guys, so how does this work? Does s3 include s1-2 or I'll have to download those separately?
Season 1 includes episodes 1 - 4
Season 2 includes episodes 5 - 8
I think the reason why there are seasons is because that's how they're packaged on Steam or something. I don't really know the details, I just go straight to the Patreon when the newest episode comes out. It doesn't mean you'll have to download separate things to see all episodes or seasons. You just need the latest version of the main game.
Just play the latest version for ep 8 for episodes 1 - 8.
Season 3 for now is just the Interlude. It's technically not part of Season 3 but more like a short intro episode for Zoey (you'll find out about her as you play the game). Season 3 will start with ep 9 which is what we're all waiting for right now. The reason why the Interlude is included as part of Season 3 is probably because Dr. PinkCake (the dev) wanted to make a new launcher for the game because the file size was getting too big since you know, it holds all 8 episodes. So starting from Season 3, you won't have to download like an 18 GB file each time to play the newest episode but you should keep the file for episodes 1 - 8 if you want to replay something because you'll just be using a transfer save page to transfer saves from ep 8 to Season 3's launcher.
Play the Interlude after playing the latest version for ep 8.
Side note: You know ... maybe it wouldn't be a bad idea to at least have pinned comments or something for things like this. ESPECIALLY people who don't understand that their mod is probably what broke the game when playing the newest episode without first installing the fix or at least knowing they need to wait for it.