This card is read for the state in which the querent cannot tell what they are looking at, and the readings split on how alarming that is.
The cautionary reading takes it as deception, illusion, distorted perception, and information that is being withheld or misremembered. On this reading the card's advice is to defer: do not decide anything by moonlight.
The receptive reading takes the same uncertainty as productive. Dreams, intuition, imagination and material rising from below the waterline are all in the card's range, and on this account the querent is not being deceived but is being shown something that will not survive translation into daylight terms. Both readings are old and both are widely taught.
A third reading, more practical, treats the card as anxiety specifically: fear that is real as an experience and unreliable as a description. This is often the most useful of the three, because it lets a reader take the querent's distress seriously without endorsing its content.
What all three share is that the card refuses to resolve. It is one of the few in the deck whose honest reading is that no answer is currently available, and a reader who forces a verdict out of it is usually supplying the verdict themselves.
Waite's reversed meanings run to instability, silence and a deception exposed rather than committed. Readers who do not turn cards read the neighbours, which for this card matters more than for almost any other.
It is also the card most often misused as a warning about other people. Its uncertainty is generally the querent's own, and a reading that turns it into a stranger's bad faith has usually taken the easier of two available answers.