Madotsuki (Pronounced Ma-doht-ski) 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.
Since many dreams are disturbing when shared, Madotsuki may just be a typical lucid dreamer trying to find a release from her sadness by exploiting her dreams for fun and self discovery.
Fan Speculation
Wiki sperg out begins below
Name
The word "Madotsuki" (窓付き) means "window", as in an aperture or peep-hole. It is not a common Japanese name, and thus could be thought of as being more a description of the character as the player's window into the dream world rather than a literal name. It could also be a way to preserve the game's theme of loneliness by giving the character a functional, dehumanizing name rather than a personal name, conveying the character's sense of being distanced from others.
Mental Problems
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 tendencies.
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.
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.