The word appetite here refers to sexual urges and need for love. Othello thinks that by betraying his trust, Desdemona has shown that her need for love was not met by Othello alone and then she needs to satisfy her urges by having an affair. Othello promises himself that he would rather be a toad living in a dungeon than keep an unfaithful wife which could be used by others. This is indeed a serious charge against innocent Desdemona because she had been very faithful to her husband all along and had it not been for Iago, Othello would have never ever mistrusted her.

But Othello has now started doubting Desdemona to the extent that he is thinking of killing her and ending this betrayal. But underneath all this talk of revenge, we can sense pain and deep anguish. Othello had loved Desdemona with all his heart and despite the differences in their status; they had both been totally in love with each other. This was an unexpected turn of events for Othello and while we can blame him for his lack of good judgment, we cannot deny the pain in his heart that reflects from this passage.

Othello feels sorry for himself but more importantly he feels deep anguish over betrayal. When a man loves a woman, he expects her complete faithfulness. It obviously hurts when the other person is not interested, but what hurts even more is when the loved one pretends to be in love and is actually pulling wool over her lover's...

This is what Othello thinks is happening to him.
His anguish stems not from lack of love from Desdemona but rather alleged pretension of love. He is hurting because he thinks Desdemona has cheated on him while all the time pretending to be deeply in love with him.

By this time, Othello's mind has been completely poisoned. The cracks in his resolve to not trust anything said against Desdemona can now be seen clearly. He is beginning to trust Iago which is a bad sign in itself.

In the end Othello talks about how he would never allow Desdemona to continue betraying him. He says that it is the fate of most great people that they stand at such crossroads in their lives. He feels that there comes a time in every great man's life that he has to make tough choices. Othello thinks that such a time has come for him now. The tough choice for him is to either ignore what Iago is saying or to investigate it and bring an end to it- if found guilty, Othello could either forgive Desdemona or he could kill her. Othello has obviously decided to do the latter but nonetheless he does understand the options available to him.

The passage holds a very important place in the play because it is where the crux of the play lies. This short passage can help us see exactly how Othello's mind has been poisoned by Iago, how he has started thinking against his dear wife, and how he plans to take revenge.