Chapter 7 begins with a reflection on the ‘proles’. This is a large portion of the population made up of what we would call the poor or the working class; the masses.
They are ‘free’ in a strange sense.
The stringent rules which apply to those who are Party Members is not enforced upon them. They can live without much supervision by the Thought Police or others who would demand they meet the ‘Standard’.
They don’t rebel because they obviously see nothing major to rebel against. They can fight with each other, argue over trivial things.
If they rose up The Party would be destroyed. But they will never rise up.
The significance of Chapter 7 can be viewed in the Star Trek; Next Generation episode, Chain of Command (part 2) when Picard is being tortured. Shown four lights he is told that there are five.
The ability of The Party, in Nineteen Eighty Four is to not merely alter the past but to control the future. To teach people to mistrust what they see and hear. To believe, without question, what The Party tells them.
This chapter contains those ‘Alternate Facts’ that were relied on when the American President claimed he had more people at his inauguration than his predecessor.
Don’t trust your eyes, don’t trust history, believe what you are told.
Winston Smith is perceiving this, recalling events of his own past in which he saw and heard certain things which now do not, according to The Party, ever happened.
Winston Smith wonders if he is insane, if he is the only one alive who realises what is happening.