That "definition of insanity" quote is practically the tagline for the game, and has been pushed into Memetic Mutation. You're gonna be hearing "that same thing" again and again and again.
Fittingly, the scene is strongly linked to Vaas and his specific type of madness. He claims that he isn't crazy when by his own definition he has repeatedly tried — and failed — to kill Jason. He has done same thing over and over again, expecting a different result.
Outside of the meta implications, it's also a clear commentary on Jason's growing violent urges up to that point in the plot. After all, what does he do throughout the game? Kill people. What is he trying to achieve? Save his brother and friends (and kill Vaas) - and yet no matter how many people he kills, he never gets any closer to either of those goals. He's doing the same thing over and over again, expecting different results. It isn't until the good ending where he does try doing something different that he accomplishes anything.
Also, the level right after this scene? A No Gear Level with something like 2 heavies, snipers and dogs all over the place. If you rely too much on those shiny signature weapons or haven't bothered to hone your stealth skill, you will probably get your ass kicked in minutes. Then you'll try again, and if you fail to learn, fail again, and again, and again...
The What Have I Become? line comes after torturing Riley by jabbing his finger into Riley's shoulder bullet wound. This is a dark echo of Jason trying to stop the bleeding from his other brother's bullet wound with his hands in the game's opening, and Jason realizes this.
Fittingly, this ties in with what the Jackal said in Far Cry 2. During one of his interview tapes, he claims that you have to tap into the dark and make the horror of war your friend in order to overcome your enemies. But he also warned not to get lost in the dark, because if you lose sight of who you are, the dark will get you killed. There are certain lines that no man can return from once crossed. http://www.youtube.com/watch?v=Axba_QS1VC0
Which then fits into the ending choice for the game: Succumbing to Jason's animalistic urged by killing your friends and younger brother ends up getting him killed.
Jason is the middle child, and it is hinted that he's less popular than his two brothers within the social group. In addition, his girlfriend comments at one point that he lived aimlessly and without ambition (no doubt resenting his brothers to some degree) before the events of the game. That explains why he jumps into the role of a badass warrior so easily, where his growing anger and Blood Knight tendencies started, and why Jason can decide to kill his friends and family near the game's end. Know who else has issues with his sibling, and long ago made an irrevocable choice between her and something else? Vaas.
That's not all. Right before you make the final choice, Liza calls Jason by a different name- Jas. And what does Jas sound similar to?
This is a Fridge moment relating to the entire series and the meaning of the title. In English terminology a "far cry" is an idiom comparing how one thing is different from another thing; for example a sunny day is a far cry from a rainy day. In the context of Far Cry 3 the experiences that Jason and his friends go through on Rook Island are a far cry from the sanity and comfort of civilization they had known for so long. Naturally, Far Cry 1 and 2 weren't much better as the settings of those stories were chaotic too, an island filled with mutants and an African Civil War respectively.
Why does the final battle with Hoyt turn into a one-on-one arena fight with trippy disco lights if there were armed body guards surrounding Jason? There are two interpretations that can be drawn from this: 1) Jason went into a berserker rage, after Hoyt cut off his finger, and absolutely ravaged the body guards and Hoyt to death so quickly that it became an anti-climatic fight. This seemed boring to Jason and so his mind interpreted/hallucinated Hoyt as a boss battle to make the villain's death more satisfying in his own mind. 2) Hoyt is such a badass that he survived the rampage long enough to gloat and have an actual one-on-one fight. Either way, Jason is clearly losing his mind.
When Jason asks why Agent Willis isn't out in the field himself doing recon, Willis goes on a rant on why the American flag is in his hut and how in there there's "society and order", while out in the jungle, the "synapses of your brain go dark." At first, you might chalk that up as simple ethnocentrism, but in context of the endings of the game, perhaps he was onto something.
Molotov pirates will fling their bottles at anything that moves without giving a damn how close they are, or who might be in the way. But look closely at their behavior outside of combat, and the reason becomes obvious: they're completely shitfaced drunk!
One of Dennis' early lines is that "The island calls to the strong." At first glance, you might think this is just typical mystical mumbo-jumbo, but considering the magical nature of the stuff on Rook Island, it is entirely possible he was right. Jason ended up on Rook Island not by chance, but because he was brought there by the island. Furthermore, this puts Jason's actions in the good ending in new light. Not only did he resist his own mounting insanity and the temptations Citra was offering, he also managed to overcome the siren call of Rook Island itself.
The trick to defeating Vaas in his boss battle is to remember the definition of insanity. Don't shoot the same guy over and over again, expecting things to be different. Just bypass them altogether and go straight for the end of the path to Vaas himself.
Despite how, well batshit insane Vaas is, it turns out he was right about quite a few things. For example, not even halfway through the story, he basically tells you what the final choice of the game is going to be, and who essentially forces you to make it.
Vaas: You see the thing about our loved ones, our fucking loved ones, they come and they blindside you every fucking time. So they say to me, they say, "Vaas! Vaas! Who the fuck is it going to be? Them or me? Me or them?" Like, you know, like they fucking think that I need to make a fucking choice!
It gets even better than that. Once you know the whole story, it becomes clear that because of how Citra is and what she did, Vaas is being completely genuine when in the same scene he says:
Vaas: Jason, I swear to God man, it is truly beautiful that you are willing to die for the one you love.
Dennis regularly points out how he and Jason are in similar situations. In the ending, either Jason murders his girlfriend Liza in drug-induced madness and lust for power, or Dennis accidentally murders his own love Citra while attacking Jason in a blind rage.
When it comes to healing, the methods are either using medicine you've bought or harvested. No medicine, you have to perform first aid by extracting shrapnel, bandaging cuts, or setting bones. The normal person doesn't know how to to set joints back in place, but Jason was into athletics before he got to Rook Island, so a lot about his first aid abilities come from various excursions as opposed to learning it on the island like most other skills he obtained over the course of the game.
As well as his skill with the wingsuit, the parachute, the zipline and the hang glider. Jason's mentioned to be into extreme sports, so he would know exactly how to use all of these, and probably would have learned how to drive a stick-shift and a boat or two as well. Universal Driver's License? Justified!
Vaas used to be part of the Rakyat, but doesn't seem to have any tatau. Except that he's wearing a cloth on his right wrist, in the same location where Jason's starting tatau is.
The game has no Border Patrol... if you stray outside the bounds of the game world, Jason simply turns his boat around and goes back; after all, he still has unfinished business on the island. If there had been a Border Patrol (i.e. Having Hoyt blockade the entire perimeter of the islands and blow up any ships that try to leave) it would make the Good Ending the height of Fridge Horror.
Here's a minor one. Why are there Komodo dragons in all of the tombs you delve into? Because what else would be guarding an ancient Chinese tomb but dragons?
Remember how Vaas said he shot the man who told him about the definition of insanity because, at the time, he thought it was bullshit? Well, that ironically applies to Jason just as equally. Jason spends the majority of the game rejecting Vaas's attempts to level himself with Jason and make them out to be comparable monsters, even pointing out undeniable ways in which their stories are similar. By killing Vaas Jason is now the one who understands the definition of insanity but ignored the messenger, not realizing he was right until it was too late.
You soon realize not all of the supernatural things in the game are caused by drugs...
It might be fair to say that Rook Island is cursed. The very mythology surrounding the island's origin speak of countless outsiders, like Jason, who came there and conquered the island and then were driven insane.
With the amount of blood shed on the island, it would certainly make sense.
Jason is going to have some really horrible withdrawal symptoms when he gets off the island. You can't expect someone to use drugs of a mind altering nature like that and not be affected by them.
Actually, in one of the Memory Cards you can collect, they say that drugs made from the local plants have no addicting qualities, though the drugs themselves are fantastic. They have to mix nicotine in to get addictive properties.
Psychological addiction exists.
Withdrawal from his warrior nature is going to be a problem too. Going from a greenhorn who only had a passing familiarity with the military thanks to his brother Grant, to a fully-fledged killer who guns down hundreds of enemies in such a short time is going to make going back to his civilian life very hard on him. Jason wonders if he'll even be able to come back from all the evil he's witnessed and inflicted. If Jason succeeds in overcoming these problems, it won't be easy, and it will take a lot of time and a lot of love and a lot of suffering.
BUT, he's made the choice that the suffering, the pain, the constant struggle with sanity is worth it, and that elevates himself above the status of a monster like Vaas and Hoyt. That makes him truly strong. And it's heart-wrenching to hear his defeated tone as he delivers the final monologue, recognizing that he's never going to be okay again...and the stronger tone as he realizes that's okay, because he can be good enough.
As noted above the Jackal spoke of the necessity of making the horror of war your friend in order to overcome your enemies, the darkness has to be tapped into to become a true killing machine. However, he warned for a person that needs to do this to not allow themselves to get lost in the display, succumbing to the horror can make you lose yourself and might even get you killed. The choice for Jason to put a stop to the violence at the end of the game, and not succumb to Citra's temptations, shows that he realizes if he goes down that path he will never come back from it. Jason overcame his personal evil the moment he decided to do that, he did not get lost in the display and become an irredeemable monster, and that is good enough.
The Lost Expeditions missions basically outright state that Far Cry 3 takes place in the Assassin's Creed universe. It is entirely possible that the Rook Isles could be linked to the Templars or Those Who Came Before.
Note the Chinese compass-key: it shimmers white-gold, exactly like the Apples of Eden.
And Jason's exposure to all these could easily have altered his perception of reality - as the Pieces of Eden are known to do.
Not so much Fridge Horror as Fridge Tearjerker: when you're first examining Dr Earnhardt's home-made drugs, he mentions that he prefers the red pellets to the purple ones, but he doesn't explain what the reds actually do. Later, when Jason first visits the cavern hideout that Earnhardt set up for his rescued friends, there's a big bowl of red pellets set out for the guests to help themselves to; actually eating one of the reds gives Jason a vision of a night out at a club with his friends and brothers just prior to their visit to Rook Island- probably the last time Jason was happy and sane. Assuming happy flashbacks are the general effects of the drug, it's clear that Earnhart likes the reds because they allow him to remember happier times... then take into the account the fact that he first took to drugs in order to cope with the death of his daughter, and suddenly, that innocent line just became so much sadder.
Equally depressing, the reason why Earnhardt put the bowl of reds out in the first place: because he'd been in business with Vaas, the doctor probably had a very good idea as to what Jason's friends had been through. He knew that none of them were going to escape unscathed; he could have just given them some of the purples to keep their spirits up- after all, the purples "give you a lift on a grey day"- but he knew that wasn't going to be enough. So, along with food, water and shelter, he gave them the only thing he thought might be enough to keep the PTSD at bay.
A bit of meta-horror. At one point Jason asks Daisy what it felt like when she won the swimming championship. She says "It felt like I was really present. Like the whole world was me." Jason shakily admits that the first time he killed a man it felt wrong, but after killing so many...it feels like winning. The fridge horror comes in when you realize that you, the player, were in control of Jason the whole time. All that time you spent killing pirates...didn't it feel like winning?
To quote the ending of "Spec Ops: The Line"; "The truth, Walker, is that you're here because you wanted to feel like something you're not. A hero."
This ties in to how excitable Jason seems to get on a couple of missions where he uses a flame-thrower and some C4 respectively. All that death and destruction...Jason's starting to enjoy it. He has become desensitized to it. In some ways he's a reflection of the player and the game is questioning our propensity for violence and killing in the video game medium. The final choice isn't just asking how far Jason is willing to go to live out his fantasy of ruling the jungle as a Badass but also how far the player is willing to go to live out their fantasy of being a Badass by using a video game character as a proxy.
When you see the flashbacks to the nightclub mentioned above, notice that there are two other characters aside from the group that eventually lands on the Rook Islands. One is DJ Doug, who is the one that points the group to the Islands, implying that he was intentionally sending him there to be taken as slaves (he probably gets paid to do so), but the other guy, a kid with a rasta-hat, is unknown. He seems to be familiar with the group, even teasing Oliver because of his tendency to get high, but he doesn't get a name, and he isn't one of the friends you rescue later on, he isn't even mentioned. At the beginning of the game, Vaas says something that sounds like "You want me to split you open like I did your friend?" I can't remember if that's exactly what he says, but if it is...
Vaas is an extremely unsympathetic character, until you start reading between the lines. According to multiple sources, Vaas Jumped Off The Slippery Slope when he sold his soul to Hoyt for drugs and a position as a pirate captain. But what motivated him to get addicted to drugs in the first place? This isn't touched on, and Citra never says anything about trying to prevent Vaas from getting too addicted. Vaas gives out a pretty good explanation of what he thinks about family: "They come in and they blindside you, every fucking time. So they say to me, they say, Vaas, WHO THE FUUUCK is it going to be?! Them, or ME?! MEEE, or Them?!". This doesn't make sense until the ending, when Citra forces Jason to choose between leaving the island, or killing his friends and family to become king of the Rakyat. Citra is shown to lose her fašade of sanity as Jason proves himself to her, indicating that she shows an obsession with people who impress her and will not stop for anything until she gets that champion. Finally, in Vaas' youtube miniseries, episode 2, he actually says that he was in love once. So basically, if Vaas has the perk of saying only the truth and putting all his deception in outsmarting/breaking the main character, then it's implied that he started out as a warrior, got a girlfriend, was given an ultimatum by his unstable sister (her or his girlfriend), chose to kill his girlfriend, went into a deep depression, and became addicted to drugs to stave off the mental breakdown. And this is just speculation, but it's also possible that Citra set some of this gang war up just so that her Rakyat would become heroes fighting Vaas' pirates, just like General Shepard (MW 2), but spiraled out of control when Hoyt (like Makarov) and his semi-elite army of privateers got involved.