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The way I saw it :
The town has three "dimensions" :
- Earth, where it is just an abandonned town and where the husband goes
- Purgatory (or Limbo), where the souls of those who commited hideous acts (the cultists) are stuck. This is the dreamy version of the town where the mother and the cop first appear and where those who have not escaped the fire and died roam.
- Hell, which is the reality plagued by monsters and controlled by Alessa (if I remeber her name correctly). Hell sometimes reaches over Limbo (when the sirens go off), but the cultists prevent Alessa from really taking over.
Alessa has sent her good part away and called her back so she can use the mother to get to the cultists. After their deaths, she takes over and is no longer bound to the city.
Just my two cents...
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