As a WMG subpage, all spoilers are unmarked as per policy. You Have Been Warned.
Murkoff had something to do with the town.
As this game is said to be set in the same universe as the first game, it is to be expected. It has been shown that Murkoff is both very willing to do some incredibly shady things
in the name of science by happily jumping over the
Moral Event Horizon with gusto
and have the ability to hide it extremely well using equally shady means and possibly governmental help. It would not be a stretch to imagine the company performing some kind of horrific experiment on an entire
town and then be able to completely cover it up without anyone noticing. Regardless of whether or not the experiment that was conducted was successful, all that matter was that
no one knew what was going on in this town, right under the nose of the US government. The two major reasons whatever horrific crap was not found out until, presumably, this game, is because the town itself was either on its very last legs and teetering into a ghost town, and/or was already so small it barely registered on any government records, and because Murkoff was a lot more successful in containing the experiment and getting rid of anyone who could have been able to blow the whistle on them. I imagine that some of collectibles in this game would involved the protagonists finding files from Murkoff itself which shed some light on what the Hell's going on. Though its debatable if these files
will actually explain everything or just
make things even more confusing.....
- More likely is that Murkoff, still recovering from being outed from the last game, agreed to hide to the town so that Mr Crazy Priest of Crazy Mentalnessness could do all of this shit and then Murkoff swooped in and did stuff when it was empty; they can't take the blame then — THEY didn't kill anyone, THEY didn't experiment on anyone, all THEY did was move into an empty town... which they had conveniently allowed to become empty in the first place. Remember, they're "twitchy and immoral corporate paranoiacs with resources [we're] too moral to imagine". They'll cover all their bases if necessary...
- There are a few hints, and all but outright stated in Outlast: The Murkoff Account, that everything about Temple Gate and Knoth's cult is the result of another of Murkoff's secret experiments. Several tower relays across the lake send brain-washing microwaves upon the subjects, bringing forth the hallucinations seen throughout the game, and a recent electric storm appears to have caused anomalies.
- There's also the fact that Lynn's final words when Blake tries to show her their newborn daughter is 'There's nothing there....'. She could have been trying to tell Blake that the pregnancy and whatever he's holding wasn't real.
- The Outlast Trials reveals more information that confirms Murkoff was responsible for the experiments at Temple Gate. The Sinyala facility featured was confirmed to be the same facility glimpsed at later across from the lake during Blake's harrowing journey.
The ending was all in Blake's mind.
After everything he'd been through, plus the trauma of losing his wife after she gave birth to their daughter, he suffered a psychotic break that got worse after Father Knoth's pre-suicide pep talk. When he calls out to God before being engulfed by light, that's his broken mind's way of accepting that everything that happened to him was for some predetermined reason. The final scene with Jessica in the school gives him (and the player) some sense of hope that he'll be able to recover from what happened to him.
The DLC will have you playing the future caretaker of the supposed
Antichrist.
You start off as an investigator sent in after Blake and Lynn, and over the course of the game you discover the Mind-Control Device that Murkoff made...and that due to their Army of Lawyers, it's escaped any major consequences for Mount Massive. Eventually, your character discovers Blake's daughter, but by this point, the investigator has decided that even if the prophecy is true, [[ItIsBeyondSaving a world that allows Murkoff to live isn't redeemable, and there's this thing called the Thousand-Year Kingdom slated to happen after the Antichrist's defeat anyway. So, s/he takes the baby away, with the last shot being of a distinctly number-like scar as the investigator meditates on his/her role in the Final Battle.]]
Lynn will be the playable character in the DLC.
Probably the most obvious option, given the fact she's one of the few sane characters in the game, Lynn is also missing for the majority of the events of the main game and it's mentioned that she escaped at least twice off-screen and her story could help confirm/deny several theories around her and the main events. Also, it's possible Lynn has similar hallucinations to Blake and could put a different spin on what he sees during the main game.
The baby is the new host for the Walrider.
The way I interpreted the elimination of the Walrider in the comics was Miles's body being destroyed and the Walrider... seeping... into the environment. The Walrider might have been weakened by whatever device Murkoff used to disperse it as well as losing bits of itself that were "vacuumed" up in the Murkoff's cleaning operation. It could only inhabit less complex beings, such as the ants. As for Temple Gate, the signal from the Murkoff towers is related to the Morphogenic engine according to the comics. This attracts the Walrider's influence. Enter the religious cult. Knoth, even in his signal induced insanity, realizes that something bad will happen if a baby is left for the Walrider to inhabit, which he interprets in the most convenient way his mind can, an Antichrist. He and his cult kill every baby and resolve to kill all births afterwards. However, the Morphogenic engine mostly affects those put through trauma and suffering, so the continued signals eventually open Val and her cabal to the Walrider's influence (as you can see from her journals), driving them to try to subvert Knoth and birth the Walrider host. Then the events of the game begin. There are a few reasons why the helicopter could have crashed, simple mechanical failure, the Murkoff signal overloading the electronics, or the Walrider sensing that the perfect host is in Lynn's womb and somehow crashing the helicopter (bird strike?). Whatever happens, Lynn is now onsite, presumably around 12 weeks pregnant judging by the lack of visible baby bump and Blake mentioning that they haven't had sex for months. Alternatively, she isn't pregnant at all and the Walrider just preferred a "fresh" mother for its host, untouched by the Morphogenic Engine. The Walrider, through his own physical influence and through the heretic sect, hurries her actual pregnancy or psuedopregnancy. As she goes into labor, the Walrider's influence gets more and more powerful, resulting in the dust bowl storm near the end. The baby (presumably named Jessica by Blake) is born, but not in any way that we would recognize it. Blake sees her as a normal baby, while Lynn sees nothing, why? Well, Blake went through the trauma of Jessica's death, and so is vulnerable to the Morphogenic engine. Lynn presumably had no such trauma, but was influenced enough to have an induced psuedopregnancy. The baby could have been a result of a real pregnancy or it could not, either way, the baby wasn't normal. The dust storm clears as the Walrider coalesces into the baby. Now in a host that can't fight it off like Miles could, the Walrider is at its most powerful, "beaming" back at the Murkoff signal and overloading the towers, causing the facility to explode. The Walrider is out in the world, more powerful than ever.
Blake was in a coma for several months
Working on the idea that the pregnancy was real and not magical, during one of those times when Blake was knocked out and in the power of one of those people that sometimes seems to want him alive, that person took care of him for several months while he recovered, and he woke up at night again, giving enough time for Lynn to start showing.
Murkoff's experiment is messing with the batteries
Another side affect of the tower explosions is ruining the charge on the batteries. That's why the camcorder keeps needing to gets it's batteries replaced.
The baby birthed is Jessica, reborn
But not as her old self. The Walrider from the original Outlast was a swarm of nanomachines capable of control through the Morphogenic Engine by extreme mental divergence. Come the game's setting, Billy Hope had successfully gained complete control over this entity, causing the events of
Outlast.
Going by supporting notes and written material in-game, the nearby Murkoff microwave towers had influenced Knoth (and his followers) with thorough effects that coincide amongst themselves - orderly signs of the apocalypse, affective phantom births and deaths, etc. This either means two things; that the microwave effects were moderated and intentional (to some degree), or that the subjects themselves had influence over the delusions.
We know for sure that a mind can control a powerful, incorporeal entity in this universe, and it's hinted that the female patients of Mount Massive were relocated 'somewhere' because of the fascinating phantom pregnancies they suffered under the Morphogenic Engine. So, we can take it a step further and say that Murkoff microwaves can induce similar entities in the form of pregnancies - aka, Lynn and Blake's newborn baby. Incorporeal like the Walrider, or maybe even semi-corporeal/fully personalized through the power of video game logic. A single nanomachine swims within Lynn, and ... well, you piece it together. In fact, Lynn carrying said nanomachines bodily would explain how Knoth was able to 'tell' she was pregnant. If the nanomachines were infecting Temple Gate as separate individuals naked to the eye, then what nanomachines within one subject might 'sense', or communicate, with another.
OutlastII's ending spliced together Blake's last memories with Jessica - in reverse. You first get a long flashback of her murder. After the baby is born, you see the moments before the previous flashback. And as the sun implodes with the apocalypse, you see the moments before that flashback. The game ends with said final vision of Blake finding Jessica in a game of hide-and-seek, and then praying Psalm 3:5, a prayer asking for a peaceful and forgiving death. While a baby is being born, Jessica's death is simultaneously being reversed from the moment of murder.
And Blake's last recorded voice memo? While carrying the baby and eyeing the town's mass suicide; "She'll be okay. You have her. She'll get to grow up. She'll do everything she was born to do." You can't 'grow up' when you're in heaven. AKA, this 'she' is alive and apparently has a duty to uphold. Blake was probably not the one speaking, and instead was repeating what was being told to him. Possibly by some semi-sentient nanomachine-esque entity.
And what's Jessica meant to do? She would have been borne from a murder sprung from sexual abuse performed by a religious official, conceived by cults who commit sexual abuse ordered by religious officials. She was likely (accidentally) murdered because her abuser feared retribution on some level, and became angry that she came close to letting Blake know the situation. Knoth feared an antichrist and sowed this fear amongst his followers. Val coveted Knoth's fear and wanted to sustain it.
Jessica, as the supposed newly-born 'antichrist', is destined to wield this fear as a weapon.
Loutermilch is innocent and Blake was the real villain
Blake actually assaulted and killed Jessica. In order to cope with this guilt, he fabricated the false memory of Loutermilch being the culprit. The "demon Loutermilch" in Blake's dream sequences doesn't represent trauma, it represents Blake's own perverted and murderous dark side.
After all, Loutermilch himself is such an easy scapegoat. We know so little about him except that he's a stern middle-aged priest with a big ugly birthmark; he's just the kind of authority figure that a child would pick to demonize because he looks weird.
