- Spoiler: show
- Alot of folks are talking about alternate timelines. I really don't think that's what's happening here.
Sephiroth, like Aerith, have a connection to the lifestream. They have an inside look at Gaea's plans for the planet but they don't have the complete picture. The Arbiters of Fate are like the white blood cells of the lifestream (and, of course, act as a proxy for fans who say they want the original game unmolested).
Aerith knows that she will be a sacrifice for the planet and Sephiroth knows his plan will end in his own demise. Aerith is willing to go through with it to save everyone but Sephiroth wants to defy fate. He goads the party into defying fate with him by showing them incomplete images of the original timeline and scaring them into action.
Aerith is willing to do this as well because she wants to live, but Sephiroth now just cast the die for a future in which he might actually win. Setting up Cloud and company to defeat the Arbiters once and for all removes them from the board, which allows for changes to the planets plan. That's why we see Biggs waking up in the orphanage (Jessie and Wedge's fates are unknown at this point, though it was alluded to that the Artibers flung Wedge out of the window to mimic his original fate and Jessie's glove hints that she may have actually survived as well).
Zack's scene is actually a precursor to his death in the original FF7. He's still going to die. The crisps packet was an allusion to him being the original "Stamp" but different than Cloud (terrier vs beagle). Zack is dragging Cloud like that right before the Shinra soldiers gun him down from behind.
So now, we are in a world that is free of Gaea's plan, which, like Aerith said, is beautiful, terrifying freedom.
Another bit of meta-commentary on the game itself.
My own thoughts on this -- well, this was the only way that OG fans would have any sense of suspense going into future installments (instead of growing dread, which was what I was envisioning). I still thnk Aerith is going to die. In fact, I think most if not all of the OG plot points are still going to happen, just remixed in a way that will make them a little less expected.