When hysteria and paranoia take control, chaos ensues.
This means that when people let paranoia and hysteria get to them and start to control them they start to cause chaos
This is a dialogue
Tommy-"That was the way they prepared things for the landing. They sent four people. A mother and a father and two kids who looked just like humans...but they weren't."
Now you can infer everyone is thinking, "then who is the things." They are now probably paranoid and don't trust anyone.
"Charlie slowly raises the gun. As the figure gets closer and closer he suddenly pulls the trigger."
This is stage directions
This is saying that he was so scared and paranoid of the figure that was walking towards them Charlie shot it because he didn't trust it
This is the Narrator talking"before the monsters came."
This is telling us that there were monsters. This is now telling us that their is monsters. We can infer that the narrator means that the people in the neighborhood really thought that there were monsters in the neighborhood.