Rod is later arrested by the sheriff (Nancy's father) for the murder of Tina. Nancy now starts to see the man in her dreams. While she falls asleep in class she is haunted by the image of Tina in a body bag and a hall monitor who morphs into the man. She visits Rod in jail and he tells Nancy about the man. Now convinced that the man is the one that killed Tina and not Rod, Nancy is concerned about falling asleep. She has Glenn stay with her while she sleeps and begs for him to stay awake. In her dreams she witnesses the man try to murder Rod. She wakes up to her alarm and tried to run to the police station to stop her premonition. Unfortunately it is too late and the man hangs Rod with his bed sheets.
Nancy confronts her parents about the man and her mom, who has become increasingly drunk and erratic, comes clean about Freddy Krueger. She explains that Krueger was a child murderer that the parents of the town trapped in a factory and burned to death after he was released on a technicality. Nancy seeing the lack of willingness to do anything from her mother and lack of belief from her father decides to take matters in to her own hands to stop Krueger. She hatches a plan to pull Krueger into the real world by having Glenn wake her up after she grabs him in a dream. She boobytraps her house to kill him after he is in the real world. Unfortunately Freddy kills Glenn before the plan can go off. Nancy decides to go through with it anyways and while everyone is at Glenn's she falls asleep. She manages to grab Freddy after a struggle and pull him into the real world where he is hit by the traps and eventually led to the basement. Nancy sets him on fire but Freddy manages to survive.
Seemingly unstoppable even in the real world Nancy has to think fast. She realizes that his power comes from fear and decides to confront him. While talking to Freddy she turns her back on him and tells him that she takes back any energy she gave him and that she's not afraid any more. As Freddy lunges to attack her he disappears seemingly gone forever. The ending scene shows Nancy driving off with her now alive friends before the top of the car comes up and it's the red and green Freddy strips. Further proof that it's a dream and Freddy is alive comes when a clawed hand grabs the mom and pulls her through the window of the door.
The character of Freddy Krueger still is infectiously unnerving even today and it boils down to two things. First the character is really shown a whole lot throughout and when he is, he's usually cloaked in darkness. It adds to the mystery because the kids we're following in the movie have no idea who this guy attacking them is and as an audience we don't either. The second and biggest part is the acting of Robert Englund. The filmmakers wanted to hire an actual actor for the villain and it paid off. He's downright terrifying when he's tormenting the kids in the movie. He manages to take lines and scenes that would come off as corny or cheesy and make them utterly horrific.
There's a lot the movie does well. The way the story is told from the perspective of the kids, while the parents even though they know what is happening, refuse to believe or acknowledge them. The way the movie plays with your mind a bit with no real transitions between the dream and reality, you never know if a character is still sleeping or now awake. It keeps you on edge the whole time, the only obvious dream moment comes at the end. The special effects are great as well, especially Tina's death watching her being dragged on the walls and the ceiling. A lot of passion went into the movie and it shows.
The movie isn't perfect however and unfortunately a lot of scenes of ideas fall flat. My biggest gripe is the ending. Personally I would have liked something more open ended, something that made you wonder if it was still a dream or reality and never answering that question. I don't mind keeping Freddy alive, but just the way it was handled I feel was pretty poor. The other issue is that some of the gags, especially the more famous ones, don't really hold up. The scene in the beginning where Freddy stretches his arms is one that sounds creepy and maybe could have been executed well but feels a bit cheap. The other is the scene where the phone turns into Freddy's mouth. I know people love those scenes but to me they feel dated especially now.
Overall Nightmare On Elm Street still manages to shock, scare, and unsettle. The effects and acting are top notch, the story is above average, especially for the horror genre. It manages to rise above it's legacy as a slasher film. Even if you think you know everything about it, if you haven't seen it, it's worth the watch. It's really a horror movie that will have you questioning everything and wanting to never sleep again.