Jethro heard - Just above, in the incident with Amalek, it says that they came, "And fought with Israel at Refidim" (Ex.17:8). So it would make sense to follow that with "On the third month after the Children of Israel had gone forth from the land of Egypt..." because then it says, "Having journeyed from Refidim, they came to the Sinai Desert." (Ex. 19:1-2) If that is so, then why is the story of Jethro inserted in between these two chapters?
Now Rav Saadia Gaon said that Jethro came to the Sinai Desert before the giving of the Torah. But in my opinion, he only came in the second year, after the building of the Mishkan. Because it says in this chapter that he offered, "an olah and other sacrifices to God" (Ex.18:12), and it never says that they built an altar.
It also says, "I inform them of the laws and teachings of God." (Ex. 18:16) That has to be after the giving of the Torah, and further proves my position. And it also says Jethro came, "where [Moses] was camped at the mountan of God." (Ex. 18:5)
And now I will explain why the story of Jethro was inserted here. It is because the Torah mentions above all the evil that Amalek had done to Israel, so now it mentions in contrast all the good that Jethro did for Israel.