He's an unreliable narrator and Phillips hasn't yet revealed what is real or a delusion.
But if you watch again, pay attention to the cuts and the different types of flashbacks used.
"That laugh in that scene is really the only time he laughs genuinely," Phillips said. "There are different laughs in the movie. There is the laugh from Arthur's affliction and then there is his fake laugh when he's trying to be 'one of the people,' which is my favorite laugh. But at the end, when he's in the room at Arkham State Hospital, that's his only genuine laugh in the movie."
"There's a lot of ways you could look at this movie," Phillips explained. "You could look at it and go, 'This is just one of his multiple-choice stories. None of it happened.' I don't want to say what it is. But a lot of people I've shown it to have said, 'Oh, I get it — he's just made up a story. The whole movie is the joke. It's this thing this guy in Arkham Asylum concocted. He might not even be the Joker.'"
"Maybe Joaquin's character inspired the Joker," Phillips said. "You don't really know. His last line in the movie is, 'You wouldn't get it.' There's a lot going on in there that's interesting."
Phoenix himself also explained that Joker can be seen not so much as a straightforward narrative, but as a series of suggestions, if you will. "This movie requires a certain amount of participation from the audience," the actor said during his own conversation with the Times. "It's up to you how you want to interpret it and experience it. It's less you being kind of presented with the facts than you being presented with these possibilities."
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