She awakens from the nightmare screaming. She thinks it's over. Only to find a zombie- or any variation of a monster- sleeping next to her. She awakes again. "Holy shit" she says. The scene ends. Perhaps the first example of the 'double nightmare' scare is from An American Werewolf In London. In which David dreams of horribly disfigured zombie Gestapo officers massacring his entire family and slitting his throat. He awakes to the nurse. She goes over to the window to open the curtains and behind them is one of zombie troopers from his nightmare, stabbing her repeatedly. He awakens for real this time. "Holy shit." This has been used again and again in horror films and television shows since then. The nightmare within a nightmare.
Dreams contain disconnected memory fragments. Pieces of nostalgia from our childhoods that remain intact. This is where Freud departs and Ligotti takes over. He's much more interested in the memory itself.
Before I go further, I implore you to listen to the full story.
The setting of the story is the Crimson Cabaret. The unnamed narrator is seated at a table and is joined by art critic Stuart Quissler, who tells of his childhood memories of gas station carnivals. The rides are peculiarly small and all are out of order. The 'performers' at these carnivals are usually the gas station attendants dressed in an unconvincing get-up. There is one exception: The Showman. Quissler tells of how him and his parents would go to see The Showman perform. His back turned to the audience. Instead of having this piece of the story take over the story itself, starting with Quissler as a child and building a climactic confrontation with The Showman, it is presented as a secondhand anecdote.
The narrator dismisses the story. Only to replace it with an equally bizarre explanation. He relates it to art magic. A theme Ligotti would use in several of his stories.
Everything in the story thus far has a sense of vagueness. The unreality of the characters are implied by withholding their names. The name of the club this takes place in is The Crimson Cabaret and the owner is The Crimson Woman. The sideshow performer is The Showman. Then there is the matter of the title of the story. Gas stations are only meant to be places you travel through. The carnival by contrast, has no function except being itself. "Let's go to the carnival except it isn't a carnival, just a gas station with some extras."
At some point, the art critics leaves. The next day they meet and the narrator asks Quissler about the meeting they had last night. Only Quissler says he was home that night and never went out. Quissler mentions that the last time the narrator was at the Crimson Cabaret, hr insulted the Crimson Woman by telling her to take down her paintings. The narrator goes back to the Cabaret and asks the Crimson Woman about this. The Crimson Woman tells him he did not insult her. It was the waitress who convinced her to take down her paintings so she could get her paintings on the walls.
Weird fiction author Michael Cisco writes on this story: "The narrator presses on, and no we might believe we are uncovering the real plot of the story, the revenge of the crimson woman. The narrator does not seem to notice or care that his plot is also pretty hackneyed, but, by linking magic to art, Ligotti is roping us into the curse, since we are currently reading a work of art. The artist makes you believe things that aren't true, but- as Lovecraft wrote in "The Silver Key", since all we know of reality is just pictures in the brain anyway, there's no reason to prefer one set of pictures over another. The terrifying possibility of the story is that line between dreams or delusions and reality is something that can only be lost, it can never be found."
People are lost in their own delusions throughout this story. Every character has a theory about who is doing what but nobody is certain. That creates this pool of doubt they all springboard into. What if what I see is not real? Every wake up from a dream where you were certain what you saw in that dream was real? In Ligotti's world, there is no reprieve. No breath of relief where the nightmare is over. There is only uncertainty of the waking world.