Factual error: In the flashback, when Teddy was among the soldiers liberating Dachau, there is a semi-circular sign above the gate that says "Arbeit Macht Frei". Dachau had a sign with those words on it, but its sign was oblong. The sign at Auschwitz was that shape.
Factual error: When U.S. troops arrive at the concentration camp, they are wearing M1941 Field Packs. These were developed by the United States Marine Corps and were only used by Marines, not the Army. The standard pack systems used by the Army would've been the M1928 Haversack or M1936 "Musette" Bag.
Factual error: The movie is set in 1954, but the pinball machine named 'Seven Seas' in the staff rec area was not actually released until 1959 - even the metal legs on Gottlieb machines would not be introduced until 1957.
Factual error: Two characters discuss a recording of Mahler's quartet for piano and strings in a minor. The manuscript for this adolescent piece was discovered by his widow, Alma, in the 1960s. Difficult to accept that there was a recording available in 1954 when the movie was set.
Answer: The bandage is a symbol indicating when and when not Teddy is caught in his delusions. When the bandage is on he is delusional, thinking he is the marshal finding out all the dark secrets of the facility. When the bandage is absent he is lucid and aware of his past crimes and his own delusions.
Wrong. It's on the whole movie until he takes a shower. The bandaid is off but yet that's the scene where he runs in the lighthouse thinking he's the Marshall still. Did you watch the movie at all?