Thanks everyone for all of your concern. This morning at about 10am his knee went back to normal on its own (thank goodness!) but I still brought him to the vet for his appointment. His right knee has been a grade 3 for a while now but it has never given him any problems whatsoever so we havent done anything. Our doctor gave us some pain meds for a couple days since its probably sore being that it was out all night! And he also taught me how to get his knee back into place if it happens again. Since this was the first time he's had any trouble the doctor suggested we wait and see if it will happen again before doing any surgery, he said some dogs do just fine with it as long as their not jumpers (which Pete is not). So if we have a second episode within the next couple months Ive decided I will go see an orthopedic surgeon, which my doctor did give us a recommendation for and it happens to be my emergency vet which I have been completely satisfied with, they do good work. So far tonight Pete's back to his usual self sleeping on his dad begging me for food and seeming to have no problem with his knee, so we're crossing our fingers and hoping this was just a freak occurance.
Thanks again