What did the man w/ scissors see?

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I don't think the man was actually seeing anything physically in front of him. I think that by the time we're introduced to him, right before he kills himself, he's too far gone to really be seeing any of the people in front of him. I think the narrator mentioned something like that as well. I think the man may have been seeing what drove him into this state of terror and madness, something taking place only in his mind. Maybe a memory or a chain of memories of something horrible he did, or something horrible that was done to him. He could have been reliving all of these things, and he was so terrified and horrified by what he saw that he stabbed himself in the eye to stop seeing it all. This could parallel the end of the movie when Masuoka finally looks truly terrified. He's terrified by something in his mind, with the things that he's done, rather than F. Masuoka probably called F "F" since F is the first letter of Fuyumi, so he could also be disturbed by the fact that his mind deterriorated to the point where he saw his daughter as this creature in this underground world existing only in his head. That could add to his terror.

This is only one theory of many that I have, agreeing with the idea that all of this was really imagined by a man who was slowly losing his mind. I don't think there is any one explanation. I don't think one theory can account for all of the symbolism in this movie.