Madotsuki is the player character in Yume Nikki. Fans speculate that she is young, anywhere from nine to fourteen years old, although arguments can be made for any age. One notable argument is that she is "chibi" style and probably no younger than 16 if she lives alone. Madotsuki is the only character with an official name, since characters require a name for the menu screen in RPG Maker games.
Real Life
Not much is known about the life of this girl - only what can be seen in-game can be considered canon.
Madotsuki doesn't have much to do in her room. Her TV doesn't receive any channels (no more support for analog signals would explain the test screen, a possible prediction from 2004), so she can only play her single game, Nasu. She can go outside on the balcony, but the balcony itself must be rather high, and her view always seems to be blocked by fog.
The only thing that is generally accepted among fans is the that Madotsuki is a hikikomori, or shut-in. This is supported by her refusal to leave her room- instead, she simply shakes her head.
Dream World
Little is known either, of how Madotsuki feels in the dream world. Some effects seem to show her unhappiness (e.g. knife), however, since the player ultimately controls Madotsuki, it is unknown whether Madotsuki would use it on her own.
Fan Speculation
Depression
It is possible she is depressed, and the dreams are caused by her medication. (REM rebound, common for low dosages and withdrawal, or longer REM cycles.) Depression would explain her images of despair, hopelessness and end-game tendancies.
Gender issues
Due to the recurring images of orifices, blood and a road with womb-like creatures, with possibly other things, and the fact that Madotsuki uses both the men's and women's restrooms in her dreams without hesitation, Madotsuki may feel gender troubled. This can be taken in either direction. She could be a male to female transgender living as a female or a female who feels male. However, it seems to lean toward MTF due to KyuuKyuu-Kun, who looks like a phallus followed by a disturbing face in the shape of a penis head, complete with a possible urethra. This would mean she hates her penis. On another note, she may be afraid of growing up and menstruating.
Rape
A theory that uses opposing interpretations of the facts in the 'gender issues' speculation, it is believed that Madotsuki may have been raped before the events in the game, perhaps leaving her pregnant. There are many creatures with bloated abdomens , one of which she can stab. The location Uboa directs to, has an image that could be interpreted as groping.
One major evidence supporting this claim is Kyuukyuu-kun, since to reach it, the player must stab a wall with a zipper looking pattern, leaving a bloody vagina-like opening. Then, one is directed to a dark room with only a stairway and Kyukyu-kun, rubbing its pole. Once the player goes through the stairs and enters the door, FACE (jp: 赤の王様, The Red King) appears, waking up Madotsuki. Again, this shows a fear of penises.
The MTF transgender theory can actually be used to further support Madotsuki's relationship to the events leading to FACE and rape. The bleeding orifices could just as easily be a torn anus. KyuuKyuu-kun could be an interpretation of the odd and discomforting, yet pleasant sensation of her getting masturbated by the rapist. In the events following this, she got anally raped, which would be excruciatingly painful and frightening. This would give Madotsuki two reasons to fear penises, enough to cause her to wake up out of fright. (the only other time this happens is when she falls to her death as a witch.)
In this theory, Masada can be interpreted as the rapist due to his crossed eyes, which recurs for negative characters. His walking backwards shows a predetermined fear for Madotsuki, so she could have somehow blackmailed the rapist, her piano teacher. Also bear in mind this character is most associated with beds.
Accident, Orphaned
The bloated abdomens may be Madotsuki's decapitated pregnant mother involved in the same accident that mangled the girl whom Monoko is based on. This would be highly traumatising, as her unborn sibling dies as well. The severed heads in the monochrome world could be people who died in the accident, perhaps Madotsuki's mother and father. This speculated sibling could be Monoe.
Severed Head may be linked to the decapitated mother and father in the front of the vehicle. Stoplight could be linked to the accident happening at a stoplight.