The Shop on Main Street ending explained

What happens

During the round-up, a drunk, panicking Tono shoves Rozalie into a back room to hide her from the guards, and in the confusion she dies. Realising what he has done, he hangs himself.

The last image

Tono and Rozalie, dressed up, walk happily together through a bright, sunlit town square.

What it says

Tono's protection becomes the cause of her death: panic and small evasions, not malice, make catastrophe possible. The dream shows the life that could have been, and the contrast with what you just saw is the film's final blow.