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This is a section I have created that will explain all the events in Silent Hill 2 that may have confussed you, or even gone unnoticed.
 
(The Pyramid Head part is interesting =P )
 
ABOUT JAMES / HIS STORY:
 
James was married to Mary Shepherd-Sunderland who had been diagnosed with a terminal disease and eventually deteriorated to the point of having violent mood swings. At an unspecified date, James smothered Mary with a pillow to end both their suffering.
 
James then decided to drive to Silent Hill and commit suicide in a place they both cherished.  But before he arrived there his mind snapped from the trauma of killing Mary and he repressed the memory.
Instead he believes that Mary has been dead for 3 years and that he has recieved a letter from her. Later on in the game, the letter disappears from James' inventory, indicating that it was an illusion.
 

James enters the town via hiker's path, eventually meeting Angela, who has also just arrived in Silent Hill. James disregards Angela’s warnings about the town and reaches the main roads only to discover that the entire area is covered in fog and infested with grotesque monsters. He tries to find him and his wife's "Special Place" mentioned in the letter he got from his wife.

James' first guess as to Mary's "Special Place" happens to be his first destination, Rosewater Park. Because all direct routes are destroyed or barricaded, he must cross through an abandoned apartment complex, where he meets Eddie Dombrowski. The apartments are also the scene of James' first encounter with Pyramid Head, a relentless persecutor who hunts down and terrorizes him at several points in the game. James repeatedly runs into a mysterious little girl Laura who continually taunts him.

When James reaches Rosewater Park's lakeside observation deck, James thinks he sees his wife, but is mistaken when the scantily clad woman introduces herself as Maria. James agrees to let Maria accompany him for safety's sake. While tracking Laura to Brookhaven Hospital, Maria stops to rest in a patient's room, claiming to have a mild hangover. James, after traveling the monster-infested hospital, finds Laura who then convinces him to get a letter from Mary in a room. She then locks the room trapping James in with some creatures called Flesh Lips. After defeating the monsters, James quickly finds that the hospital has been horribly transformed. He finds Maria and they try to find a way out of the hospital. In the basement, Pyramid Head reappears behind both of them, and Maria is gored by the creature's Spear while James is helpless to save her.

After exploring the town some more he finds a key that lets him into Silent Hill Historical Society, which according to the map is also a port to get to the Lakeview Hotel. However he soon finds a series of disturbing secret entrances and bizarre holes that lead him into Toluca Prison. Eddie resurfaces again in the cafeteria, now armed with a Revolver and is once more sitting in close proximity of a human corpse. James attempts to reason with Eddie, but his reasoning has no effect on him.

As James explores the empty prison facility, he finds himself within a maze. He relocates Angela, who is being terrorized by the "Abstract Daddy," a creature representing Angela's abusive father. After injuring the monster, Angela finishes off the monster in a series of violent attacks and has a tense confrontation with James. Pressing on, James finds Maria, locked inside a cell, alive and unscathed following her death in Brookhaven Hospital. Maria comes onto James and beckons him to find a way into her cell. She also undergoes a change in personality, switching between Mary and Maria's personalities at random. Maria also drops clues regarding Mary's "special place" and a videotape she and James made together.

Eventually, James locates an alternate route to the cell, but upon entering, finds Maria lying dead on the bed. James exits the cell, and eventually stumbles upon Eddie surrounded by bullet-ridden corpses. Eddie gleefully admits the solution to his problems is killing. When James protests, Eddie says that James is making fun of him too and attacks him. James injures Eddie who runs into the next room revealing that both he and James were summoned to the town for a similar reason. James is then forced to kill Eddie in a gun battle inside a meat locker.

Emerging at an old pier at the edge of Toluca Lake, James sees a bright light that is visible from the northern shore; He boards a rowboat and makes the journey to the opposite side. The light is emanating from the Lakeview Hotel, which looks exactly the same as when he stayed there with Mary. James finds Laura there who hands him a letter that she got from Mary and leaves James again.

James locates the old videotape mentioned earlier by Maria, and finds his way to Room 312, where he and Mary had stayed on their holiday. Inserting the tape into a player, James watches a static-ridden video of himself as he smothers Mary to death with her pillow. Laura enters the room and asks James if he has found Mary yet and James tells her what really happened. Laura proceeds to yell at him and leaves, which is the last we see of her. Exiting the room, James finds the hotel flooded and burnt-out and eventually comes across on a stairwell surrounded by fire. Angela and James speak for the last time and despite James’ pleas, Angela proceeds up the stairs which are blocked by the flames.

Entering what was once the lobby, James finds Maria, alive and tied down, screaming for James' as she’s surrounded by two Pyramid Heads. For a third time, Maria is killed and James finally understands what Pyramid Head and Maria are. The Pyramid Heads are a part of James’ himself, created subconsciously to punish him for murdering his wife. Refusing to flee from his opponents, he turns and attacks the Pyramid Heads. With James now seeking vengeance as opposed to punishment, the Pyramid Heads cease to function and they deliberately impale themselves on their spears.

James finally meets a woman who resembles Mary before the final boss fight. The outcome of this encounter is determined by the player's action during the game.

 
ABOUT ANGELA:
 

Angela is another character drawn to the town after committing murder. She is a disturbed, unstable teenage girl who is ostensibly on a search for her mother. It is strongly implied in the game that Angela was abused and raped by her father with her mother turning a blind eye. Backstory material provided by Konami states that Angela had run away from home prior to the game's events, and after being brought back kills her father, leading to her being drawn to Silent Hill.

James first meets Angela in a cemetery, where she warns him that there's "something wrong" with Silent Hill. She is next seen in the apartment complex area with a knife contemplating suicide. James takes the knife from her at her request, and she flees in panic after he initially tries to take it out of her hand. In the "labyrinth" area James fights a monstrous version of Angela's father who is about to attack her. After the creature's defeat Angela acts with disdain and general hatred towards James, and accuses him of abandoning Mary for another woman. She is last seen at a burning staircase in the Lakeview Hotel, again unable to carry on living and unable to forgive herself for killing her father. Angela ascends the burning staircase, her fate unclear.

 
EDDIE DOMBROWSKI:
 
Eddie is the third murderous character in Silent Hill during the game. He is an obese young man with an apparent connection to the character Laura. His dialogue during the game reveals that he had suffered verbal abuse for much of his life prior to his arrival in Silent Hill, and his arrival was preceded by him finally snapping, killing a dog, shooting a football player and going on the run from the police. Backstory material provided by Konami describes Eddie as being usually calm but with "another side that he cannot control when angered" and listing his former occupation as being a gas station attendant.

James first meets Eddie in the apartment complex vomiting into a toilet and aggressively denying any involvement with the death of a man stuffed in a refrigerator in an apartment. He is next seen talking to Laura in a bowling alley, ignoring insults and disdainful comments from Laura and James while doubting that his then-unspecified crimes will be forgiven. His final appearances are in the prison/labyrinth area, where he confesses to killing the man in the apartment and another victim on the grounds that they were mocking him, and apparently has no moral issues with killing. By the end of the level he is dangerously unstable and threatening to kill anyone who he sees as mocking him, leading to a fight to the death with James after a poorly received comment from the latter. In the final cutscene before his death Eddie seems to conclude correctly that James too was a murderer, telling him that they were both "called" to Silent Hill as they're "not like other people".

 

ABOUT MARIA:

Maria is a sexualized manifestation of Mary created through James' mind based on an exotic dancer and through the stress in his mind after killing his wife. She first appears in a scenario prior to the events in the main game with James, entitled "Born from a wish" in the expanded versions of Silent Hill 2. It shows that Maria wakes up in Heaven's Night club deciding if she should continue to live and fight, or to let herself die at the hands of monsters. Eventually she decides to venture out to search for someone alive. Her search takes her to an old mansion, where she meets an anti-social man by the name of Ernest. Upon their second meeting Maria inquires about a letter she has discovered which was written by a little girl named Amy. Ernest reveals that he is her father and that Amy died a while ago. He then comments that perhaps there is hope because Maria can see him and instructs her to obtain a white liquid in an apartment next door as he is unable to retrieve it himself.  When Maria brings the white liquid back, it is revealed that Ernest is not able to leave his house because he is a spirit of a dead person and that he is attempting to resurrect his dead daughter, Amy. Before he departs he warns Maria of James, saying that he is "a bad man" and that he is looking for the her that isn't her. The end of the scenario depicts Maria in Rosewater park comtempleting suicide by putting the gun to her head before she meets James, but she is unable to deny her strange attraction to James and throws the weapon over the wall.

James first meets her in the Rosewater Park, his first suspect for the "Special place" Mary claims to be in. Maria accompanies James after this point, seeking protection from the monsters in Silent Hill, and after reaching the bowling alley she leads James on an attempt to find Laura ending in Brookhaven Hospital. Maria is killed by Pyramid Head before she can escape the hospital. She reappears again, inexplicably alive and with no memories of her apparent death, in the Labyrinth in a jail cell, seductively beckoning James to rescue her. Before he can reach her, however, she is killed again. She appears a third time in the Lakeview Hotel, where she is killed by two Pyramid Heads promptly after James finds her.

 

ABOUT LAURA:

Laura is an eight-year-old girl wandering the town. She is apparently the only "Innocent" human character in the town, in contrast to James, Angela and Eddie, and consequently does not see any monsters or serious abnormalities in the town. Laura is an orphan who befriended Mary during her last year alive, having been a patient at the same hospital as her, and like James appears to be searching for Mary in the town as well (unaware of her death). She acts rudely towards James and Eddie, the two characters she encounters, motivated with the former by a belief that he did not really love Mary.

James first encounters Laura in the apartment complex, where she kicks a key out of his reach. He confronts her in frustration after the level is cleared, where her connection with Mary is revealed. She is next seen at the bowling alley with Eddie, and after she leaves James pursues her at Maria's request. He finally finds her at the hospital, where James accuses her of lying when she details her connection to Mary. Laura responds by locking James in a room full of monsters. Laura is seen again at the Hotel with a letter confirming her friendship to Mary, and she becomes angry with James when he tells her he has discovered he killed Mary. In the "Leave" ending, James leaves Silent Hill with Laura in an apparent fulfillment of Mary's wishes to adopt the girl.

 

ABOUT PYRAMID HEAD:

Of the creatures that appear in Silent Hill 2, Pyramid Head is one of the few that is overtly Masculine in appearance, whereas the other monsters generally have Feminine features to them, with the exception of the Ideal Father/Abstract Daddies. Pyramid Head resembles a pale man covered with an off-white, blood-soaked robe reminiscent of a butcher's smock. His most outstanding feature is a large, red, triangular helmet that covers his head completely. It was reportedly designed to appear painful to wear, suggesting that it serves as some kind of punishment. Like the Nurses in the game, Pyramid Head wears plain white gloves with partially connected fingers, either to conserve polygons or for a unique effect. Early designs show him with a strange tattoo on his left shoulder, but this does not appear in the game. Pyramid Head is usually armed either with the Great Knife or a lightweight Spear. However, he can also attack with a strangle grip, during which a black tongue-like protrusion "stabs" James from a small hole in the front of Pyramid Head's helmet. A similar attack is used by other creatures in the game, including the final boss.

Pyramid Head does not speak, but grunts and moans painfully inside the helmet at different times. He displays much brutality, killing monsters and people alike, and is even seen seemingly raping a few of the game's monsters in a violent manner.

In the additional back story material created by the game's designers it was explained that the physical appearance of Pyramid Head was an effect of James' fascination with Silent Hill's history. As we may learn throughout the game, Pyramid Head's appearance was a variation of the outfits of the executioners from times past, who wore red hoods and ceremonial robes to make themselves similar to the Valtiel, the angel of the town. He was born out of the towns peoples' idolatrous ideologies. According to documents created for the release of Silent Hill 4: The Room, a sect of the Silent Hill cult, (the "Valtiel Sect") wore the executioner's costume depicted in Silent Hill 2.

His helmet is also a possible reference to Jimmy Stone (a high member of the cult of Silent Hill and Walter Sullivan's first victim), as when performing certain rituals he would wear a red triangular hood, which earned him the nickname 'Red Devil', a term constantly mentioned throughout the series. It is more likely that Jimmy Stone and Pyramid Head are visually referencing the same historic individuals. Or even Jimmy Stone is actually Pyramid Head, brought back to punish James.

In Silent Hill 2, his existence is directly tied to James' subconscious, James' repressed anger and desire to be punished for the death of his wife are what compels Pyramid Head to pursue him. Pyramid Head functions as both an executioner of Maria, but more importantly, as the constant tormentor of James. Watching Pyramid Head repeatedly murder a highly eroticized copy of his late wife brings a great deal of grief to James, thus completely satisfying his masochistic desires. Once these desires are fulfilled, and James replaces his need to Suffer with the need to Avenge, Pyramid Heads' power over James is removed. This is evidenced in one of the game's final scenes, where just before battling two Pyramid Heads simultaneously (one as punishment for killing Mary and the other for killing Eddie), James gains insight into his situation, admitting that he needed them because he was weak, and that he has no further use for them. It is only after James asserts this that the Pyramid Heads eventually impale themselves on their own spears and thus freeing themselves of their roles (it's mentioned that they are both punisher and victim of crime).

I personally believe that Pyramid Head is Jimmy Stone. I mean do the maths! Jimmy Stone was known as the Red Devil, and Pyramid Head is often named the Red Pyramid. Jimmy Stone were a Red Pyramid/Triangler Hood in the rituals of excecuting, just like Pyramid Heads'. Jimmy Stone was a executioner with the same clothes. So when you think about it, it makes sense that he has come back to execute Maria to Punish James for his crime. Case closed, Pyramid Head = Jimmy Stone!

PS: There are also speculations that Travis from Silent Hill: Origins is Pyramid Head. In the Bad Ending it is revealed that he is transformed into a figure with the same clothes and Pyramid Shaped Head helmet is placed on him. (No! The Butcher isn't Pyramid Head, just similar). This means that the Bad Ending in Silent Hill: Origins is the only true ending.

There, I hoped that helped you understand what's going on in the game if you didn't after playing it at first.































[Everything There Is To Know About Silent Hill]