I think the dream shows where the swordmaster and the weird guy met. The author probably used it to make the connection between the two characters clearerand, as someone who didn't read the novel, i have to say it helps foreshadow the intentions of the swordmaster.
@Knighto i think in this case what counts is that the chainsaw was feared by demons, whereas guns where feared by humans all over the world since politicians secretly produced guns and secretly distributed them