The irony in the statement (by G. Ligeti) that West Berlin is "a surrealist cage in which those inside are free" is that this caged situation was actually a free situation. One would normally associate being caged up in any manner, as restrictive, constraining, and a slave-like condition, or even an incarceration. One would not typically associate being held within a cage as a liberating experience or condition.
However, West Berlin, during the Cold War, was an oasis of sorts within the Communist desert of East Germany. East and West Berlin were separated by the Berlin Wall. West Berlin was not under East German and by extension Soviet Union control; it was a haven of freedom. It was, essentially, a "surrealist cage" of freedom within East Germany, whereby its citizens enjoyed freedom and the luxuries of Western society and they were not under oppressive rule from the East German government and state police.
It indeed was a surreal situation - this freedom in the middle of state control but not touched at all by this state control - people living free while others of their divided nation were experiencing the trials of being under brutal communist-influenced control.