So, what is the meaning of the secret (Formless) ending?

[Nedly Dedly]

Is it supposed to be hinting at the sequel or DLC in some way or what?

[Zombifest]

Hey there! Remember when discussing endings to do so in the spolier sub-forum. Moving this over :)

[atpqual]

I'd say it's a hint about the connection between Layers of Fear 1 and 2. In both games, an entity is guiding the player through a loop while they attempt to give life through their art. That entity is the one you see in Formless. It seems she's credited as "Rat Queen" which would make her very similar to a figure from the first Layers of Fear. It's hinting at the overarching storyline.
And hopefully at another sequel, yeah.

[Shaidis]

The Rat Queen looks like The Queen of Magoots from game developer Harvester Games. Her voice is the same. She looks a little bit different, but her outfit is the same. And she tells almost the same phrases about candles and flames. I really don't know what to think about his ending, my thoughts about what's going on in Layers of Fear 2 just shatters in pieces. Assumptions, anyone?

[atpqual]

I'm not sure how much of the game's meaning is supposed to be left open to interpretation. It's a metaphor for closure and there are also supernatural elements, but how much is a metaphor and how much is actually physically real depends on how you see the game.

The story is about either James or Lily trying to survive (both literally and metaphorically) their troubled past. They had an abusive father, ran away, and the boat they were on sunk. It's hinted at that Lily possibly died in an explosion and James possibly drowned. There's also some evidence that Lily was sexually assaulted, either by her own father or by some of the ship's crew.

During act 4, you find a series of drawing made by James, representing him meeting an entity of some sort, probably the rat queen judging by the drawings. He then says he'll go find Lily and will do what it takes, then asks the entity to show him how to get Lily back.

In act 2, you can find a note talking about the existence of supernatural entities who are attracted to people of great talent. The way the note is written is reminiscent of the painter's notes from LoF1.

The actors and the painter's journeys are similar: they're both trying to either come to term with a traumatic loss, undergo a psychological journey exploring their past, flaws, and mistakes, and seem to get less and less stable over time, represented by the environment getting more and more altered and abnormal as you progress through both games.

The endings are similar as well. In LoF1, the painter can reclaim his past glory and disregard his mistakes, make amends by killing himself, or fail at reaching true closure and restart his painting all over again. In LoF2, the formless ending represents failure as well. Formless, in cinema, means an actor who failed to properly embody a character, and that's exactly what that ending means. The entire game is about Lily or James (depending on the ending) coming to terms with the death of their sibling and accepting that they'll never be together forever, like they promised.

To get closure, the player must guide the actor through choices that point towards either Lily's or James' personality, which represents the way the surviving sibling rebuilds themselves. Doing that leads to either Lily's or James' ending, where the surviving sibling lets go of the past and survives. The formless ending is unlocked when the player fails to consistently choose between the two siblings, which represents the actor's inability to let go of the promise to "be together forever", making them unable to rebuild themselves. The actor remains formless, stuck in the past, unable to truly be their own person and live on, doomed to restart from the beginning and try again.

Depending on your interpretation, the rat queen can be either an actual supernatural entity, or a representation of loss. Either way, the general meaning of the story and its endings remains the same.

[KaweedFul]

This was a very good theory, until I saw "James possibly drowned"... James survived the sinking. Otherwise how could he talk to the interviewer on a park bench? Especially saying what he's saying about Lily.

Lily died, James is left with a trauma, and he becomes an actor to rebuild his sister, literally playing Lily's character (girl clothes in the hub). He must lose the character and find himself, or find the character and lose himself (quote from chapter 4).

But very nice interpretation nonetheless

[Simbiat]

I like how it may be interpreted as dealing with survivors guilt (which I, in a sense, dealt with or rather still dealing with). If you "obey" you, actually, "accept" the facts of what happened, what had to be done to get you to this point in time. Director is like a psychotherapist helping and guiding you to health. If you "disobey" - you are blaming yourself (which is a big theme if you pickup the items and listen carefully), driving yourself into a corner and replacing yourself with an illusion: Lily is living through James, because he makes himself believe that. And if you go for "formless" you are... Well, still work in progress, you can go both ways. I guess, this game can even help actual psychotherapists in determining patients' status, because I am a "work in progress" and I inadvertently got the "formless" ending and I understand why I made those choices and why they can be considered "wrong".