What is happening during this flashback scene from The Evil Within?

Question

In Sebastian's flashback he sees Valério scratching his head and and imagining himself...

Where does this image in his head come from?

Also he disappears then he reappears as a haunted?

Can someone please explain this?

Answer 1

As far as I can tell, this is simply a STEM-induced flashback which depicts Valerio turning into a Haunted. So the actual timeline is not that Valerio disappears and reappears as a Haunted, but instead that Valerio turns into a Haunted, Sebastian kills Valerio, and then Sebastian has a flashback which shows Valerio's transformation into a Haunted. You will notice that the part of Valerio's scalp that he was scratching in the flashback is bloody when he turns to kill Sebastian indicating that the "itchy" flashback events takes place before the fight between Sebastian and Valerio.

From The Evil Within wiki page on Valerio:

Sebastian frantically puts down the abberant doctor in self-defense, Marcelo in utter disbelief.

Afterwards, Sebastian experiences another STEM headache and a flashback of Valerio's transformation into a Haunted appears; Valerio is seen screaming maniacally about an 'itch' located on his left temple, which he madly scratches open in desperation. Valerio is seen with red veins all over his body like other Haunted and begins mutilating a portion of his scalp as he fades away.