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When Ted and Allegra enter eXistenZ, they meet with D'arcy, a Video Game Store clerk, who gives them each a Minipod (which looks like a smaller version of the eXistenZ pod they used to enter this game) claiming tha "they contain your new identities". When Ted and Allegra plug in the Minipods (actually absorb them whole through their bioports), an awkward sex scene ensues and we cut to Ted (with "Larry" namedag) in the Trout Farm standing confused by the production line.

Is it another game within a game now? Or are they still in the world of eXistenZ and the Minipods actually contain new identities of "Larry" and "Barb" that they used to enter the Trout Farm?

The movie is (intentionally) confusing in this matter:

  • On one hand, there is a straight cut from the sex scene to the Trout Farm, but the sex noises are still audible for a while, slowly fading out, which seems to indicate Ted's consciousness slowly transcending into this Minipod world while his and Allegra's bodies are still going at it in the level above. Also, Ted stands there confused and not knowing what to do (until he lets his character take over for a while) as if he's just got there.
  • On the other hand the worlds of eXistenZ and Minipod start to blur in following scenes, with characters and places being mentioned between the game levels (the other Video Game Clerk mentions both Yevgeni Nourish and the Chinese Waiter), which makes me think: maybe they're still in the same world? Maybe actually some time has passed between the awkward sex in the back of Video Game Store and they entered the Trout Farm the next day? Maybe in the world f eXistenZ the Minipods are not for gaming but actually do act as identification and absorbing them could be used to assume new identity to pass as "Larry" and "Barb" who work at the Trout Farm?
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From what I recall, my interpretation was that there are three distinct layers to the movie.

Layer 1 is reality (or presumed reality). We see this briefly at the end of the movie when the two main characters kill the game inventor.

Layer 2 is the first level of the game, where Ted Pikul (Jude Law) and Allegra Geller (Jennifer Jason Leigh) meet up, get Ted a port, and have intercourse.

Layer 3 is the second level of the game, where Ted and Allegra are playing a game where they are assassins. At one point we even see Ted pause the game and return to Layer 2 for a brief moment. The game ends and they return to Layer 2, with some "bleed over" from Layer 3 causing confusion because at this point the players, and the audience, believe that we are seeing reality.

The intention of the confusion is to show how games can alter one's interpretation of reality, and for some people how hard it is to differentiate between the two.

  • They have intercourse in Layer 3, inside eXistenZ. My question was: was the Trout Farm on Layer 3 too (and they went there under new identities of Larry and Barb that they got by absorbing the minipods) or did they enter a new Layer 4 upon absorbing the minipods? – mzywiol Nov 30 '17 at 20:27

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