After Banquo leaves him alone, Macbeth awaits Lady Macbeth's signal (the striking of a bell) that all is arranged for the murder of the king. While in this state of dread and expectation, Macbeth sees a dagger floating before him, it's handle pointed toward his hand. As he stands transfixed, unable to believe what he is witnessing, the blade of the dagger turns bloody before his eyes:
Mine eyes are made the fools o' th' other senses,
Or else worth all the rest. I see thee still;
And on thy blade and dudgeon gouts of blood,
Which was not so before.
Macbeth's "fatal vision" concludes with the ringing of the bell, his signal to go about murdering Duncan in his sleep:
I go, and it is done: the bell invites me.
Hear it not, Duncan, for it is a knell
That summons thee to heaven, or to hell.
The appearance of the dagger can be interpreted in two ways. As a supernatural event, it adds mystery, suspense, and horror to the play. As a psychological manifestation of Macbeth's guilt, it provides insight into his character. Either way, it creates a spellbinding moment of drama.
In Act II, Scene I of William Shakespeare's Macbeth, Macbeth has a conversation with his old friend Banquo and Banquo's son Fleance. Banquo and Fleance have not been able to sleep, presumably because they are very perceptive people who can sense the evil atmosphere of the night. When Macbeth shows up, Banquo asks him why he isn't in bed either. He mentions that King Duncan is in bed already, happily sleeping after the wonderful banquet at Macbeth's castle. King Duncan was so happy that he has sent a bunch of gifts to Macbeth's household, including a huge diamond for Lady Macbeth. Macbeth feigns humbleness, saying that the feast was not as good as it could have been because they were unprepared since Duncan had announced his arrival pretty late. Then, Banquo changes the subject to the three weird sisters, or witches, that the two of them had encountered earlier. He says he had a dream about them, so he started thinking about how their first prophecy (that Macbeth would become the Thane of Cawdor) had come true. Macbeth pretends that he has not thought about them at all, but he says to Banquo that they should find some time later to talk about the witches' prophecy. Banquo agrees and leaves.
After this, Macbeth tells the servant to tell Lady Macbeth to strike the bell whenever his drink is ready. This is actually a secret signal that Duncan is asleep, and "ready" to be killed. Suddenly, he sees a floating dagger (small knife) in front of him. It is unclear whether this is a hallucination or the result of evil spirits. The handle is pointed towards his hand, as if indicating his agency and guilt in what he is about to do. He wonders if he is going mad because he is seeing visions, or if it is witchcraft. He wavers and hesitates, but in the middle of his emotional turmoil, he hears the bell ringing. The signal from Lady Macbeth makes his decision clearer: no matter what, he must murder Duncan that night.