A. S. Byatt’s story “The Thing in the Forest” can be analyzed as a straightforward Gothic-type fantasy in which the events described actually occurred. Alternately, the story can be taken to represent the unbearable guilt of the girls, Penny and Primrose, which they can only remember as an abstracted horror. The fact that both women remember is that the third girl, Alys, did not return from the forest with them.
Their initial telling of her disappearance includes their seeing the “monstrous Worm” and presumably believing that it devoured Alys. When they return to the countryside as adults, they find a book in which this worm is illustrated. It is implied, although neither woman explicitly states, that they projected this illustration onto their experience.
The question of whether one or both of them actually killed Alys is never answered. The second interpretation seems more likely, suggesting a theme related to the power of imagination, such as that people invent stories to cover up misdeeds or guilt over them.