The dancing girl performing at the evening's "entertainment" represents something that the narrator, as with all African-Americans, cannot have. The narrator lives in a deeply segregated society in which sexual relations between the races is considered completely unacceptable. So for him and the other boys to be confronted by an attractive white woman acts as a reminder to them of their place in society.
Whatever the boys might want, and whatever they might hope, they will never be allowed to take their place in society. The woman is strictly off-limits to them in the way that the benefits of white society are to be denied them, whether it's a decent education or a good job.
The tattoo of the American flag on the dancer's belly reinforces the scene's deep symbolism. The promise of America is ultimately out of reach for the narrator and the other boys. It's as if the...
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flag belongs to a different country, a country where they're not welcome. The tattoo acts as evidence of ownership. The dancing girl, and the country she represents, are effectively owned by the white man. That being so, the narrator and the other African-American boys are being reminded in no uncertain terms of their place in this unjust, racially segregated society.
In the story, the dancing blond woman symbolizes forbidden sensuality; she is also a temptation leveraged by unethical men for their own sadistic pleasures.
The blonde's seductive appeal draws male eyes to her. The white men and African American teenagers are fascinated by her, but only the former are allowed to consider developing sexual relationships with her. The narrator and his group of peers are taunted for the dilemma they find themselves in.
In truth, the narrator is horrified by the intensity of his emotions towards the dancing blonde. The text tells us that he both despises and desires her. His conflicting emotions cause him to become angry and confused. He knows that he is damned if he looks at her and damned if he doesn't. The white men understand the universality of male sexual arousal and are using it to tempt the African American teenage boys to indiscreet behavior. For their part, the boys recognize their predicament: if they succumb to their sexual inclinations, their lives may be forfeit.
It is very likely that the narrator's upbringing has inspired his disgust with the dancing blonde's seemingly uninhibited postures. Yet, he is naturally drawn to her undulating, naked body. He is not the only one facing a dilemma: another boy unsuccessfully tries to cover his erection with his boxing gloves.
So, the dancing blonde symbolizes forbidden sensuality and a sexual tool utilized by unethical men for their own sadistic pleasures.
The narrator of the Battle Royal understands that the both he and his group of "warriors" as well as the dancing blonde woman symbolize the otherness of women and minorities during this time period. White men were in control. They used women and the black boys as playthings for their entertainment. Both the woman and the boys are reduced to "things" in this book, and especially in this excerpt. They can not hope to be treated as humans...not even with the delivery of his excellent speech about, ironically, "social responsibility".
The woman is naked and seems to be under the influence of alcohol, drugs, or the protection of her own mind taking her to another place far from the oogling eyes of these men and boys. She is an embarrassment to herself and to the black boys since to look on a white women with clothing on is not acceptable, much less to stare at a naked white woman. She is the forbidden land for these boys. The emotions they have in seeing her are channeled into a free-for-all chaotic blindfolded boxing match. The boys are filled with shock at her state, embarrassment at having witnessed it and reacting sexually to it, and rage at the white men for having subjected them to this seige of emotions for their own evil entertainment.
To the white men, this woman nor the boys are individuals. They are no better than animals thrown into a ring and made to bleed internally and externally.