The arrival of Sergeant Major Morris, who has probably been in the English colony of India [this story was published in 1902], brings with him a monkey's paw that he has acquired from a fakir, or ascetic who is thought to have mystic powers, although in more modern times the term fakir has come to be used pejoratively for beggars who chant holy names, scripture, or verses. At any rate, there is something of the mystical and exotic attached to this severed monkey's paw.
After the sergeant throws the paw into the fire, Mr. White retrieves it because he dismisses the power of this paw as mere superstition, believing as the sergeant has mentioned, that "it's a fairy tale." Then, when Mrs. White hears that there are three wishes granted by the magical paw, she remarks, "Sounds like the Arabian Nights." This allusion is to a well-known fabled Eastern storybook, The Thousand and One Nights in which there is a magic genie in Aladdin's lamp, who also grants three wishes. And, as in W.W. Jacobs's story, fate designs that the wishes of the unwise and evil lead only to their nemesis.
Thus, this famous reference conjures the exotic as well as acting as foreshadowing for the action to come. For, the impulsive wish to have money by Mr. White is one for which he has not considered the possible consequences of the result of receiving such a sum from an unknown source. He, like those in the Arabian Nights, foolishly challenges fate and loses,
...the old man smiled faintly, put out his hands like a sightless man, and dropped, a senseless heap to the floor.
Defeated by fate in his wish for two hundred pounds, Mr. White realizes that foolishly he has brought death upon his son as the representative of Herbert's place of employment brings the sad news of the young man's fatal accident.