Nightmare is a new challenge that was added in update 1.2.0. It is a new episode that will not appear in the episode menu so you need to access it in-game. It will appear in the top-right corner of the screen during any episode. If you tap on it, it will bring you to a picture, showing nightmare zombies and Dr. dexter.
First you meet Dr. Dexter, she exclaimed that you are awake. She tells you that you are in a nightmare, you reply "I'm dreaming?". She says that you are unconscious and the fact that you are in your mind. She says that Violet is carrying out her evil plans. She's trapped Blitz, Teeter and Raider somewhere in the city. You get confused and reply "Violet?". Dr. Dexter tells you that she's trapped raider a few blocks down, and Violet has an army of nightmare zombies to take you down.