Psychology of the Unconscious is Jung's extended study of how myth and symbol illuminate the structure of the human mind. He begins from the discovery that dream imagery is symbolic rather than literal, and asks a deeper question: where does the capacity for symbolic thought come from? His answer is that it comes from a second mode of thinking, phantasy or dream thinking, that operates alongside directed, logical thought and draws on material far older than any individual life.
To trace this older material, Jung analyzes the published daydream-poems of an American woman, Miss Frank Miller, whose spontaneous visions of sun-worship, creation hymns, and a dying hero allow him to map the movements of psychic energy as it withdraws from outer reality and flows into archaic images. The Miller Fantasies serve as a running case study that interweaves with broad comparative excursions into Hindu scripture, Greek mythology, Gnostic texts, German Romanticism, and the anthropology of fire-making.
The book's most consequential theoretical move is the redefinition of libido. Where Freud had confined the term to sexual energy, Jung proposes a genetic account: libido is the whole life-force, originally undifferentiated, which differentiated over evolutionary time into nutrition, protection of offspring, art, language, and sexuality. These functions are not simply sexual at root; they are transformations of a primal creative energy comparable, Jung says, to Schopenhauer's Will or Plato's Eros.
When the libido cannot flow forward into adult life, it regresses and takes up archaic symbolic forms. The solar hero who descends into the underworld and rises again, the devouring mother from whose embrace the hero must break free, the sacrificial death that releases new life: all are symbolic dramas of the libido's struggle to transform itself. The soul, Jung concludes, possesses historical strata, and the oldest stratum corresponds to the unconscious: when strong regression occurs, images of mythological antiquity surface in dreams and psychosis alike.
The book closes with the sacrifice of Chiwantopel, Miss Miller's doomed hero, whom Jung reads as the part of the libido still bound to infantile attachment, unable to leave the mother-world for the demands of real life. His death in the fantasy is a wish for freedom: the infantile personality must be sacrificed so that an adult one can be born. Throughout, Jung presses the claim that myth is not primitive error but psychological truth, a thought common to humanity, expressing itself in symbol because direct expression was too dangerous or too early.