Continuity mistake: At the hospital, when the doctor talks about Peyton's injuries, note that in front of him stands a group of doctors with a medicine cabinet behind them. When Peyton escapes and they all return to the room, the cabinet has been replaced by a window.
Continuity mistake: At the fair, Peyton runs away with the pink teddy elephant and Julie goes after him. She passes by a woman holding a bunch of balloons. In the following shot the woman is nowhere to be seen.
Continuity mistake: When Julie is handcuffed, hanging on some rods, in the close-up shot the watch on her right hand disappears.
Continuity mistake: When Julie free falls she is facing a 9 o'clock direction. When the shot changes she is now magically facing 6 o'clock.
Continuity mistake: After Peyton stops holding Louis' leg, he opens his hand and there is no visible damage despite having just had a huge nail pinned through it.
Continuity mistake: Peyton lets Louis fall, who dives head first. A shot later he flies horizontally.
Continuity mistake: When Peyton's hand gets pinned to the beam, it keeps changing positions in every shot.
Continuity mistake: While standing on the beam, Louis cries "I built it all!", and the gun in his right hand appears and disappears between shots.
Continuity mistake: When Louis takes Robert's mask out and reveals Peyton's burnt face, Peyton takes his left hand to his cheek. When the angle changes, his hand is lowered and he repeats the movement. In the following shots the position of his hand is inconsistent all the time.
Continuity mistake: During the helicopter scene, when Peyton is hanging onto the cable, in the close-ups he's simply grabbing it, but in the wide shots the cable is strapped around his body.
Continuity mistake: While on the helicopter, Peyton smacks a goon's face, who turns away and shows a streak of blood on his mouth. When the angle changes his head position has changed and is now facing Peyton.
Continuity mistake: When Guzman runs into Smiley wearing several masks, Smiley knocks him out. On the floor, Guzman's head is facing straight-up. In the close-up, it's tilted sideways.
Continuity mistake: The wet coffee circle stain on the paper is above the word 'date'. When the angle changes and the stain is dry, the circle has moved several centimeters below and is now surrounding the word 'date'.
Continuity mistake: Halfway through the film, Frances and Colin are in Colin's office. Colin has a glass of brandy in his hand, but when the phone rings, the glass is gone.
Continuity mistake: Near the start, Julie sits on a sofa when discussing the bribe. In the wide shot, as she says "I wish it were that simple", she rests her left hand on her knee. It then cuts to a closeup for her next line, and her left arm is suddenly along the back of the sofa. (00:13:40)
Continuity mistake: Look at the police officer in the helicopter towards the end of the movie. In one shot, the words "POLICE" across the helmet are reversed like a mirror image. In another shot the same police officer's helmet says "POLICE" in normal letters.
Answer: It's just psychedelic imagery to try and show his fragile state of mind and how he's losing it. The shattering light-bulb is likely to show that his mind is "shattering" (as light-bulbs appearing above someone's head are often used to signify brains/ideas in fictional, particularly cartoons), and the marionette "dancing" is the first part of the recurring motif in which he sees himself as a "freak." (Which is paid off later when he starts singing a demented song about "Paying five bucks to see the dancing freak!").