After his capture at Winterfell, Theon is presumed dead until a piece of his skin turns up at the Red Wedding, courtesy of the Boltons. Theon's torture and mutilation at the hands of Ramsay Snow happens almost entirely offstage and is only suggested until he reappears in book five, at that point so beaten down and disfigured that no one recognizes him, especially since he is now going by the name Reek. His poor flayed finger had become infected, which is why he begged Ramsay to just cut it off, among other parts (although the castration is implied, not confirmed). In the show, we're seeing the beginnings of the torture and his psychological breakdown, and we're coming to understand why he might begin to call himself Reek, a name that has been used before in the books by other people (including Ramsay). Reek is not a person, but an identity, and Theon becoming Reek is just one step in the dastardly plan the Boltons have for him.