The events of LIMBO are the trauma-induced nightmares of Naii.
- The sister is a dream fusion of his dead mother and brother.
- The rotting corpses seen under the treehouse could be a particularly sour interpretation of the graves under the tree in his dreams.
- The final fight with the spider is a clear link to the fight with the spider monster that killed his brother.
- The images of hanged people could also be the result of remembering the more horrid parts of the journey (especially if the suicidal man is not saved).
- His fear of water is naturally increased in his nightmares.
- The older children attacking him are a logical progression of the vision he had of Naia strangling him - now multiplied and even darker than before.
- And fundamentally, all the Boy's violent deaths would be Naii taking out his self-blame on himself in the dreams.
The entire game is the younger brother's mythologized, heavily displaced account of his own murder of his older brother.This is mostly based on Freudian dream/myth interpretation. The younger brother and older brother set out on their journey, and along the way, the older brother hurts or kills a number of people - the constant bodies we see (the hanging people in the woods, the man that commits suicide, the giants and the rivers of blood, the frozen village) are sanitized, displaced forms of his older brother's actions. The younger brother ignores it, refuses to accept it, or forgives the older brother for it, but eventually the older brother rapes a young girl they met on the journey. The younger brother murders him, but regrets it immensely. He blames the girl for everything (portraying her as the murderous spider, and attributing the killing blow to her instead of accepting that he did it himself) and posthumously elevates the brother to a completely whitewashed hero or totem-spirit status.
The healing water worked, Naia just needed to be buried next to the world tree for it to take effect, because his wound was external.While Naii and his father are mourning by the gravestones, Naia has just clawed his way out of his grave and is throwing a tantrum because Naii left him and he has to figure out how to get back home on his own. Luckily their griffin friend is on it's way back to pick him up.