Yume Nikki is a strange, unknown game, with no dialogue and a unique art style. So, of course, the fans created many theories, some good, some bad, some complex, some that make us laugh. This article will categorize the theories by character. There will then by long theories with contributions from most characters.
It's also worth noting that TV Trope's Wild Mass Guessing page on Yume Nikki contains a wealth of theories too, some of them more fleshed out versions of the theories seen here.
WARNING: Game spoiler details follow
Madotsuki
Madotsuki was raped.
In the game, there is much evidence that Mado was raped. In the Forest World, along a strange road, several creatures in the background with eyes watch over you. The last one's eyes follow you for a split second as you leave. Many claim these are ovaries, which adds "sexual content" to the game. Other incidents with eyes include the Eyeball World and the Barracks where entering a certain shed can lead to a tunnel where eyes follow the player. On the way to the Witch effect eyes in the trees follow the player. The theme of being watched seems prevalent.
Hands are also scattered throughout the game, what with the staircase lined with reaching hands on the way to Seccom Masada-sensei, sprouting out of the ground in the Eyeball room, and at the White Desert too. The room Uboa teleports you to, with a nightmarish landscape where a monster with multiple hands grasps hills in the background, is reminiscent of groping to some players. Unwanted touching seems to be a theme.
Note also the pictures on the walls of the waiting room in The Mall allure to sexual situations, especially the one picturing a crying figure with a phallus shaped object on it's mouth. This migth be interperted as further abuse suffered by Madotsuki.
Some say that Kyu-Kyu, a large colorful pole creature, rubbing the banister of a stairway, is phallic imagery. The Knife and Cat Effects alter the speed of which Kyu-Kyu rubs the rail of the staircase, speeding it up or down (which could mean that the rapist used to be gentle when she indulged him and rough when she tried to reject/fight him). Full-screen events feature an event called FACE, which is achieved by going through a door right next to Kyu-Kyu. Some say it resembles a penis, fear itself, and/or static. The sequence in which the player stabs through a wall(which closely resemples a zipper), leaving a bloodied hymeneal opening, leading to a seemingly benevolent phallic-shaped Kyukyu-kyun, leading to a terrifying FACE, suggests sexual assault to some players.
A dread of pregnancy, possibly originating from being raped, can be interpreted from monsters whose shape resembles a pregnant woman who has lost her head.
Something else to consider, is that Nasu, or eggplant, is a symbol of fertility in Japanese culture.
Madotsuki is pregnant or has had an abortion/miscarriage.
The deep background image of many of the places strongly resemble a fetus - this also connects well with the rape theory above. The thing hovering in the background has a feeling of being very distant, yet always present and inescapable.
Madotsuki lives in an apocalyptic world.
Madotsuki seems like a perfectly normal girl, albeit possibly being a hikkikomori. Yet her dreams are strangely terrifying and eccentric, and she acts like she has been there before, displaying almost no emotion. That, combined with the fact that her apartment is the only one in view, she won't leave her home, her TV doesn't get any channels, and her only source of entertainment is a Famicom game, it would seem that whatever is out there is worse than what is in her dreams.
Madotsuki is transgender.
She is "male" but identifies as a woman and lives and dresses as one. It could also be vice-versa. The characters could be distorted versions of friends, family, and peers that have alienated her (or him) after she/he came out to them as a trans woman or a trans man. In support of Madotsuki actually being a female to male transgender man, the psycho Toringen could stem from Madotsuki feeling that his own body is working against him. The blood, and imagery of female reproductive systems are signs of hate and resentment towards periods and female puberty. While the phallic imagery could hint, in this case, towards his desire for a penis and male reproductive organs, they could also hint that when he came out as a man, it was met with violence. Many trans men are victims of rape from cisgender male attackers, as the attackers feel that raping them will put them back in their "place". The Toringen party could hint at Madotsuki's separation from the cisgender girls.
In support of the theory that Madotsuki is a male to female transgender woman, the Toriningen party could actually mean that she is isolated from them due to her not being a "real girl" in their eyes. The psycho Toringen could be classmates that shamed her into dropping out of school and locking herself away. She still could have been raped by cisgender men on coming out, as it is also a common method of "teaching" a lesson in hate crimes, but the more horrific instances of phalic imagery could be Madotsuki fighting against her own biology, and resenting it.
The graffiti world to monochrome world path could actually tell a story about Madotsuki's transition from a boy to a girl. She wants to have the priviledges and social status as a female (women's toilet) so she flees from her masculinity (bicycle) and begins to descend (elevator). Many people fail to accept her who recognize her as the boy she once was (mall people), yet her therapist gives her comforting advice, telling her everything is going to work out in the end (O-San). Eventually she starts to feel ugly (frog) and isolated, feeling that it will be a long, near impossible path to follow. (To be continued) The 8-bit world, which is passed through in the path, is usually interpreted as a representation of video games. Video game playing is often though of as a masculine hobby, especially back in the 8-Bit and 16-Bit Era. The entrance to the Monochrome world has limp phalluses hanging off the wall and an eye in front of a body of water. This could be related to her penis and crying, respectively. The monochrome world itself may be interpreted as a world of regrets, which would make sense why this would all lead to that world.
There is also a small possibility of Madotsuki actually being intersex. She could either have breasts, and female genitalia on the outside, with testes where her ovaries are meant to be, or she could have the male organs outside, and the female inside, which could explain why both female and male reproductive organs have such a horrific depiction in many areas of the game. Many intersexed people suffer from anemia caused by lack of appropriate hormones. This could explain, possibly, that Madotsuki sleeps so much because she is lacking energy.
Madotsuki is a lesbian.
Poniko is her image of a perfect beautiful girl she yearns connect with but can't because other girls she knew in the past weren't "weird" that way. She resorts to desperate measures to try and get Poniko's attention (going through different effects, flicking off the lights). Thing is, she feels her thoughts are dirty and she's afraid of other peoples' reaction. Uboa, a manifestation of that fear and guilt, pops up. The signs that people interpret as rape (Kyukyu-kyun + Face, the hands and eyes scattered everywhere, the decapitated pregnant belly things, etc) aren't signs of a past rape trauma but a dislike of penis, distaste of being watched by men, fear of judgment, and fear that she too will be expected to get married and give birth some day.
Madotsuki achieves a happy ending.
A theory that proposes that Madotsuki was dreaming (or in a coma) all along. Her suicide at the end is the result of her finally coming to terms that nothing in the world is real and she has been trapped in a dream. She escapes by killing herself so she can jolt herself awake. This theory is backed up by dream creatures who surround her bloody smear in the "real world" after her suicide, the fact that her eyes are always closed, the surreal and ever changing landscape outside her apartment/house, and how she's unable to leave her room.
Madotsuki is a representative character.
Madotsuki is by no means a common Japanese name, it means something similar to "window". This name was most likely chosen to show that she is not just a game character, but a "window" into the life of people who are antisocial, depressed, alone, disturbed, etc. Madotsuki's dreams portray many different views on depression and unhappiness. These different views are not meant to represent specific events in the fictional life of Madotsuki, but general events in the life of someone who is "different". The Toriningen party could have represented a social status that a person could not reach, no matter how hard they tried. To some, a crazed Toriningen could be viewed as someone who is angered, and when the person tries to reach out to them, they are only cast out, which is shown by the Toriningen sending Mado to isolated and unescapable places. Poniko/ Uboa could represent distrust and false friendships. The strange "people" in the Department Store have no face and refuse to speak to her, possibly representing how these antisocial people may view others. This game is far too abstract to be viewed as a simple and linear plot, so a representative theme would make much more sense. In a sense, Madotsuki is the poster-child for all children and adults who feel like they just don't fit in.
Madotsuki is a murderer.
Depending on the player's actions, Madotsuki can behave violently towards NPCs and sometimes inanimate objects. Given that she finds the Blonde Hair effect near a red puddle, maybe she killed one of her friends, and the puddle represents blood. Perhaps it was a killing along the lines of the Sasebo slashing. Madotsuki doesn't want to go outside because she feels remorse for her actions.
Something terrible happenned to Madotsuki in the past.
Getting to Poniko is really hard, you have to go through a lot of places to get to her, which could mean she is locked away. Poniko could be interpreted as Madotsuki's emotional side, which, because of something either of a terrible sexual experience, or perhaps fear to grow up or lack of childhood, Madotsuki locked away because of the fear and pain to confront. Poniko ignores Madotsuki, which could also mean that confronting what happenned is too painful for Madotsuki and Poniko. Bothering Poniko (switching the lights on and off) causes Uboa to appear. That could mean that Uboa is a revenge from Poniko, from not only leaving her locked-down and alone, but bothering her. Trying to kill Uboa leads Madotsuki to a place with a highly disturbing background, if analyzed well, could also mean a bad sexual experience. FACE, could be the result of trying to confront this event, meaning all the fear, pain. Since she wakes up immediatly, it means she failed in trying to confront it, or just did it the wrong way.
Madotsuki has severe hypertropia
Hypertropia is, essentially, googly eyesin real life. Due to the way Japanese society works, her eye problems would draw a lot of attention and probably discrimination, leaving her a Hikiko Mori and always keeping her eyes closed so it's not noticeable. The googly eyes that are more or less everywhere (including the place where Uboa appears) are her psyche reminding her of the fact. The black-and-white areas, which seem to represent her younger years judging by their art syle, have occasional googly eyes in them as well. Masada, the most obvious example of googly eyes, is usually determined to be some part of Madotsuki's mind that she's trying to send off - in this case, her hypertropia and possible other mental problems (see: autism; autistic people do not interact with other people very well, and are often precocious in areas such as piano-playing). In fact, there are eyes everywhere, googly or no; theunsettling sequence in the refugee town where Madotsuki walks past a long row of shack with eyes on them, staring at her, might represent her issues about eyes, or maybe feeling like she's being put on a pedestal to be examined and ultimately judged.
Why can she see fine, despite her eyes not pointing in the right direction? It's a dream, that's why.
Aztec Imagery
It is seriously possible, since Aztec imagery appears in most backgrounds in Madotsuki's dreams and even her real life room (the carpet) that she may have a strong fascination towards Aztec culture. Maybe because of its fundaments or out of mere curiosity.
Perhaps it is symbolic, the Aztecs were hated by all people of all places before they settled in Tenochtitlan. Even when they reached the valley of Texcoco everybody tried their hardest to expel them from the proximities of the lake. Throughout their brief history as lords of this rich land they where known as dark, grim, suprahuman fighters with an intrinsic veneration to death, bodily sacrifices and motherhood as they had more than one deity that symbolized these elements that are so recurrent in throughout the whole game.
It may be that Madotsuki feels identified with these people, their culture, their art and what they symbolize.
Mars-san
It is all alone, accompanied by nothing but strange "machines" and depressing music. It is also crying. Has Mars-san simply burst into tears because it too is trapped on this strange planet, and it's helpless? Maybe the machines are it's countless ways to escape the planet.
Could this be symbolising an element of deep and utter hopelessness, being trapped, and unable to escape? Not being able to escape not just mars, but being that this is Madotsuki's dreams, maybe this is a realisation that she is trapped in her own mind?
This can easily be put with other theories to suggest a possible reason why Madotsuki kills herself in the end of the game, because she can no longer stand being trapped in her own head.
Toriningen are trying to save Madotsuki
The Toriningen might be aware of what happens when Madotsuki collects all effects, and they might be trying to prevent that from happening by teleporting Madotsuki away.