Chapter 5 of The Great Gatsby begins with Nick observing Gatsy's house in flames, this makes sense as a metaphor but is described as an actual event. Is the house in flames or what?
The Great Gatsby, Chapter 5
When I came home to West Egg that night I was afraid for a moment that my house was on fire. Two o'clock and the whole corner of the peninsula was blazing with light which fell unreal on the shrubbery and made thin elongating glints upon the roadside wires. Turning a corner I saw that it was Gatsby's house, lit from tower to cellar.
At first I thought it was another party, a wild rout that had resolved itself into "hide-and-go-seek" or "sardines-in-the-box" with all the house thrown open to the game. But there wasn't a sound. Only wind in the trees which blew the wires and made the lights go off and on again as if the house had winked into the darkness. As my taxi groaned away I saw Gatsby walking toward me across his lawn.
"Your place looks like the world's fair," I said.
"Does it?" He turned his eyes toward it absently. "I have been glancing into some of the rooms. Let's go to Coney Island, old sport. In my car."
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Let's go over this step by step so you can see what Fitzgerald is attempting to do in this passage, which I have inserted above for convenience. The place to start is to identify the psychological state of each character, Nick and Gatsby, in this passage.
Nick: Nick is coming home from work in New York in a taxi cab at a late hour. From the distance, before "turning a corner" in the road en route to his house, he sees a literal blaze lighting the dark sky. This leads him to the emotional alarm of thinking his own house was in flames. His psychological state when talking to Gatsby is one of relieved alarm.
Gatsby: Gatsby is anxious and distracted about the visit with Daisy that Nick has agreed to arrange for him. In this anxious psychological state, he is inspecting his premises to see if the reality matches up with the dream he has been planning and hoping for: he believes he can win Daisy back if he presents a wealthy enough life to her. Since he has anxiously examined every room in his mansion, every light is on and every door and window are open and "lit from tower to cellar" thus releasing light out into the dark night.
What happens in the passage: Nick is coming home and sees in the distance a bright light that looks like a fire. When he gets there, as the taxi cab drives off, he sees that is in fact electric light pouring from every door and every window of Gatsby's mansion. Nick at first explains the brilliant literal light as the results of another wild party at the mansion but dismisses that idea because everything is quiet: "But there wasn't a sound. Only wind in the trees." Gatsby approaches Nick and absentmindedly turns to look at his house when Nick says the flooding flame of literal electric light makes the mansion look like the "World's Fair." Gatsby gives the vague response that he was "glancing into some of the rooms."
The Light: Nick sees "blazing" light in the distance and fears his own home is on fire: "I was afraid for a moment that my house was on fire." "Blazing with light" is a metaphor for what Nick saw while he was still far from home. The light is literal electric light coming from Gatsby's house. The scene is meant to emphasize the magnitude of fretful activity represented by Gatsby's minimized, understated comment: "I have been glancing into some of the rooms." There are no flames. There is only the "blazing" light of electricity resulting from Gatsby's psychologically distraught activity of checking on the wealthy elegance of his mansion's rooms.
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