1. I must have lost my mind. I don't understand how the ebb and flow work.

Moon attracts water, which is more elastic than the earth. Hump A is formed.
How does hump B form?

2.

3. The effect of the moon's gravity decreases with distance from the moon. The ocean facing the moon is more affected by the moon's gravity than the centre of the earth, and the centre of the earth is more affected by the moon's gravity than the ocean facing away from the moon. That is, the bulge at B is formed by the earth being attracted towards the moon at a greater rate than the water at B.

4. Just to add to KJW's post: It is also important to note that both the Earth and Moon are under free fall conditions as they orbit their common barycenter. If they were just sitting in space and being held apart by something like a long rod attached to their solid surfaces, then you would get the situation where the water would want to pile up towards the Moon. But this is not the case, both are freely responding to the gravitational attraction between them. And since this attraction varies with distance, you get a differential of force acting across the Earth.* There is also a secondary effect. In your image, look at the left and right "edges" of the Earth. The Moon's gravity also pulls on the water there. But since this direction of pull is not aligned with the line joining the centers of the two bodies, it has a "squeezing" effect on the water, adding to the displacement towards the bulges.

*Imagine that The Earth and Moon were just falling directly towards each other. The water closest to the Moon would want to fall faster than the Earth proper, pulling ahead, while the water on the opposite side, feeling a weaker pull towards the Moon, would want to fall slower, lagging behind. if it wasn't for the Earth's own gravity partially countering this, the water would completely separate from the Earth.