Cloud's mind was affected by the experiments that Hojo did on him. You get basically two different versions of Cloud's past during the game, what he believes happened to him, and what really did happen, and even then Cloud's not quite with it. I'm going to try and sort out what really happened to Cloud, to clear up confusion. I played all the way through the game twice before I could even start to grasp what is going on.
Cloud grew up in Nibelheim, living next door to Tifa. Cloud and his mother were newcomers and not always accepted by the rest of the town. Cloud was the outcast child, and was often the target of jokes and blame. He wanted to lay with Tifa and the other children, but wasn't quite a part of their crowd.
The day Tifa's mother died, she wanted to go into the moutons to try and find answers. She got her friends to go with her, and Cloud came along. Cloud and Tifa were hiking when a bridge collapsed, nearly killing Tifa. Everyone in Nibelheim blamed Cloud for the accident. Cloud was crushed because he felt he "wasn't strong enough" to help Tifa. He decided that he would prove he was strong by going to Midgar and joining SOLDIER.
Before he left, Cloud met Tifa at the town well and made her a promise: That when he was famous he would come back and help her if she needed it.
Cloud went to Midgar and applied for the SOLDIER program. Like everyone else, he wanted to emulate the great Sephiroth, but he was rejected for the SOLDER program. Crushed, because he told everyone in Nibelheim that he was going to be First Class, he joined the army as a regular trooper.
Cloud made friends with a SOLDIER named Zack. Zack often told Cloud stories about the various missions he went on. At some point, Cloud was sent on a mission to Nibelheim with Zack and Sephiroth, to investigate a reactor. Cloud was embarrassed at the prospect of being seen by anyone, since he wasn't a SOLDIER, only a regular guard. He hid behind his mask the whole time her was in Nibelheim. Tifa looked for him, and was disappointed when he did not show up.
When they got to the reactor, Cloud stayed outside and didn't witness any of what happened the first time, ho only heard about it secondhand from Zack. He wasn't really present until he came out of the mansion with Zack to find Nibelheim burning around them.
Cloud and Zack went to the reactor after Sephiroth, and Cloud was outside. Sephiroth went crazy and killed Zack, and sliced Tifas open. (I still don't know how Tifa was able to lift the Masamune.) When Cloud went into the reactor, he took Zack's sword and sliced into Sephiroth, but Sephiroth ran him through. Cloud was able to use the Masamune to throw Sephiroth into the lifestream.
Zangan saved Tifa, and took her back to Nibelheim. Hojo took Cloud and Zack's bodies and used them as part of his Jenova experiments, which is why Cloud has Mako eyes and looks like a SOLDIER, even though he was too weak to make the program in the Shin-Ra military.
What do you see during the game? There are several schools of thought on this. One is that you are seeing an "astral projection" of Sephiroth that he sends from the lifestream to control Cloud. Another is that you are seeing a Sephiroth clone. A third is that it's Jenova herself. I personally think that it really is Sephiroth that you are seeing, and that the body you see at the North Crater the first time you go there is him, waiting for Cloud, becoming one with the Planet. He immersed himself in lifestream to get enough power to summon Meteor.
This is just my opinion. Comments, Critiques, and Flames will be accepted/read/ignored at email@example.com
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