First, we need to dive into the larger cultural concept of "Danse Macabre." Historically, the "Danse Macabre" is a common artistic allegory that began in the Middle Ages. Danse Macabre art typically shows personified death (usually skeletons) co-mingling with living people of different station—both rich and poor—as they "dance" them to their graves.

Throughout history, the Danse Macabre has been meant to remind us that, no matter our place in living society, death unites us all. Danse Macabre images have typically been used as memento mori, meant to remind the viewer that death comes for all and concern for material wealth or vanity are pointless.

Now, let's apply this to The Graveyard Book. The novel already blurs the lines between the living and the dead through Bod's adventures in the graveyard. However, his experience is typically isolated from other living people. The macabre is the strongest example of co-mingling between the living and the dead.

As the townspeople dance with the dead and await the arrival of death personified, Bod witnesses the historical theme that death unites us all. Within the context of the novel, this chapter also serves to show the connection between Bod's living and dead communities as well his unique place in the middle.

Overall, Gaiman includes this chapter to carry on the traditional meaning of the Danse Macabre while also connecting it personally to Bod.