This article carefully explains each step of the Story. Do not proceed reading if you require only a mild hint or suggestion. Instead, look for the article with the word "hint" in the title.
This is a single player story. (You do not require another player to complete this story.)
After finishing "The Lost Handkerchief" Mrs. Hatch will send you off to assist Shepherd Brimley. (You may also start this quest from the Stories list at the Writing Desk.) You will find Shepherd Brimley outside, at the sheep pen to the right when existing Mrs. Hatch's cottage.
This is a screenshot of the shepherd's location seen from the front door of Mrs. Hatch's cottage.
Walk towards the shepherd until you are close enough to speak. Left click on Shepherd Brimley to target him. Your Task List will update, after you have clicked on him, prompting you to say "Good day" to him.
To say good day, ensure you have him targeted (his profile appears in the upper right corner) and press the Enter key to begin chatting. Chatting is how you can communicate with NPCs (non-player characters) and other players alike. After you press enter you'll see a flashing cursor in the chat window in the lower left corner. Type "Good day" (without quotes) and press the Enter key.
Shepherd Brimley will explain to you (in the chat window) why the sheep have escaped from the pen. You can assist him by trying to capture a sheep. Walk towards the sheep in the open past the sheep pen.
Left click on any of the sheep to target it and try to catch it. Shepherd Brimley will let you know you need a tool to help catch a sheep. You need to locate and take a nearby rope. The rope is on the back side of the forge building, on the wall.
Left click on the rope to take it. The rope should disappear from the wall and appear in your inventory.
To use the rope to catch a sheep, left click on any sheep outside of the pen. Left click on the trunk icon in the upper right of your profile cameo to open your inventory.
Click on your right hand. You should now see the rope. Click on the rope and then click the "Use" button.
A sheep should now be faithfully following you.
Walk back towards the sheep pen next to Shepherd Brimley. To usher the sheep back into the pen, left click anywhere on the fence of the pen. Your sheep should now be safely grazing inside the pen.
You have finished assisting Shepherd Brimley and this story is complete. You will see the yellow text in chat: "Congratulations you have completed Bo Peep Chapter 1"