Per the FAQ on Keane's website, Keane's drummer Richard Hughes, stated the following:
"We've been asked whether "Somewhere Only We Know" is about a specific place, and Tim has been saying that, for him, or us as individuals, it might be about a geographical space, or a feeling; it can mean something individual to each person, and they can interpret it to a memory of theirs... It's perhaps more of a theme rather than a specific message... Feelings that may be universal, without necessarily being totally specific to us, or a place, or a time..."
With the nostalgic sentiment and the overall tone of the song, I think Keane is attempting to express a Portuguese term known as 'saudade', which does not have a direct English translation but roughly means "that which we remember because it is gone."
Well, I've walked these streets
A virtual stage, it seemed to me
Makeup on their faces
Actors took their places next to me
Well, I've walked these streets
In a carnival, of sights to see
All the cheap thrill seekers vendors and the dealers
They crowded around me
Have I been blind have I been lost
Inside myself and my own mind
Hypnotized, mesmerized by what my eyes have seen?
Well, I've walked these streets
In a spectacle of wealth and poverty
In the diamond markets the scarlet welcome carpet
That they just rolled out for me
And I've walked these streets
In the madhouse asylum they can be
Where a wild-eyed misfit prophet
On a traffic island stopped and he raved of saving me
Have I been blind, have I been lost
Inside myself and my own mind
Hypnotized, mesmerized by what my eyes have seen
Have I been wrong, have I been wise
To shut my eyes and play along
Hypnotized, paralyzed by what my eyes have found
By what my eyes have seen
What they have seen?
Have I been blind
Have I been lost
Have I been wrong
Have I been wise
Have I been strong
Have I been hypnotized, mesmerized by what my eyes have found
In that great street carnival
Have I been blind
Have I been lost
Have I been wrong
Have I been wise
Have I been strong
Have I been hypnotized, mesmerized by what my eyes have found
In that great street carnival
In that carnival
A virtual stage, it seemed to me
Makeup on their faces
Actors took their places next to me
Well, I've walked these streets
In a carnival, of sights to see
All the cheap thrill seekers vendors and the dealers
They crowded around me
Have I been blind have I been lost
Inside myself and my own mind
Hypnotized, mesmerized by what my eyes have seen?
Well, I've walked these streets
In a spectacle of wealth and poverty
In the diamond markets the scarlet welcome carpet
That they just rolled out for me
And I've walked these streets
In the madhouse asylum they can be
Where a wild-eyed misfit prophet
On a traffic island stopped and he raved of saving me
Have I been blind, have I been lost
Inside myself and my own mind
Hypnotized, mesmerized by what my eyes have seen
Have I been wrong, have I been wise
To shut my eyes and play along
Hypnotized, paralyzed by what my eyes have found
By what my eyes have seen
What they have seen?
Have I been blind
Have I been lost
Have I been wrong
Have I been wise
Have I been strong
Have I been hypnotized, mesmerized by what my eyes have found
In that great street carnival
Have I been blind
Have I been lost
Have I been wrong
Have I been wise
Have I been strong
Have I been hypnotized, mesmerized by what my eyes have found
In that great street carnival
In that carnival
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Somewhere Only We Know
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I grant that the lyric "Hypnotized, mesmerized by what my eyes have seen?" seems to imply the 'superficial' interpretations, but lyrics like "Have I been lost inside my self and my own mind?", along with "scarlet welcome carpet/they just rolled out for me" and "actors took their/ places next to me" could be interpreted not as relating to a facade, but a preoccupation with oneself as opposed to others or the world without one's own mind. Hence other people being referred to as actors instead of people, etc.
– Natalie Merchant