I just finished the game and my mind can't stop racing through different possibilities. Was the ending with Alice just a dream sequence that he wrote/imagined. Or is it an eventuality he wishes to come true one day. If so, did Alice experience that moment as well in the real world. It would seem in the Alan Wake universe consciousness stays with people no matter what happens. What do you guys think? Also I really hope this isn't the last we see of Mr. Scratch.

I don't know.

I was disappointed that there was no climatic final battle tho. I'll just take this as a fun little side story and wait patiently for Alan Wake 2.

@nomorehalfmeasures: Personally I think it did happen in the real world. From what I got the goal was to get out of the endless loop Mr. Scratch had trapped him in so that he could get back to the real world. The first thing he would do would be to reunite with Alice. Since we didn't get a final "battle" with Mr. Scratch I see him returning as well if they do a proper sequel.

Although another possibility could be that the scene we see playing out is from Alice's movie...but I like to think it is the real world.