The presence of Goody Cloyse in the forest represents Goodman Brown's first step into total spiritual disillusionment. Goody Cloyse is the woman who taught Goodman his catechism when he was a small child. (A catechism is a question-and-answer style summary of the basic doctrines of the Christian faith.) He associates her with piety and goodness. Seeing her in the woods is a great shock in and of itself, but when Goodman overhears Goody speaking in a friendly manner with the devil about witchcraft, he is overwhelmed with hurt. When she disappears from sight and the devil returns to him, Goodman wrestles with his negative feelings about the situation.
Goodman ultimately decides to shrug off Goody's presence in the woods. He figures that her actions regarding witchcraft have nothing to do with his own faith and soul. He stands firm, believing his faith can withstand whatever he might encounter next during his infernal night walk. However, his disillusionment has only just begun with Goody Cloyse. Soon he encounters other respected religious figures from his hometown as well as his own beloved wife, Faith. After seeing them consorting with the devil, Goodman comes to distrust everyone, and his faith is destroyed.