The narrator's dream in "Battle Royal" contains many images that reflect the events of the previous evening. The circus clowns represent the young men who were forced to participate in the battle for the entertainment of the white crowd. The grandfather refuses to laugh at the clowns because, the narrator recalls, he regretted being so mild-mannered in his life; refusing to laugh is a show of resistance against those who insist he or his grandson must perform in a particular way.
The envelopes are a literal reference to the envelope and scholarship the narrator receives as victor. However, the grandfather laughs when the narrator opens envelope after envelope—symbolizing endless tasks or obstacles to the black man's success, put in place by the white man—only to find a note that instructs an unknown schoolmaster to "keep this boy [the narrator] running." This is a callback to the events of the battle royal in that the narrator and his cohorts were invited to the hotel under false pretenses and put through one humiliation after another.
Even though the narrator received a scholarship and was allowed to make his speech, these victories were at the expense of his dignity—a callback to the grandfather's deathbed laments. The grandfather's laughter could be interpreted as the narrator's own realization that he will always be running, even when he seems to be victorious, because of how society views him, rather than as the grandfather laughing at his grandson's humiliation.
Circus imagery, represented by the clowns in the dream, is significant in the Battle Royal in that the the black boys, who are forced to entertain the white men, are treated as if they are no better than animals. The grandfather's advice was to "live with your head in the lion's mouth," thus comparing the white man to a lion tamer. The white stripper is described as having hair "yellow that like of a circus kewpie doll"; the young men are treated like "circus clowns." One is even characterized as "glistening with sweat like a circus seal."
The dream reveals his grandfather who "refused to laugh at the clowns no matter what they did" because they represent blacks forced by white society to "perform" humiliating acts to entertain the whites. The grandfather knows they are his own people, forced into acts of submission, just as the boys were in the Battle Royal. The seemingly endless series of envelopes implies that white society will continue to make a clown of Invisible Man.