Nightmare Mode is an extra difficulty level first introduced in Skylanders: Giants. It is considered to be the hardest difficuly level in the Skylanders console games, and is usually described as being "for advanced players with a vast army of Skylanders." Only when you complete story mode do you gain access to Nightmare Mode.
After completing Nightmare Mode for either Giants, Swap Force, or Trap Team, you unlock the following hats: Knight Helm (Giants), Volcano Hat (Swap Force), and the Rainbow Hat (Trap Team). After completing Nightmare Mode for Imaginators, you unlock the Wasteland Warrior set.
In all games developed by Toys for Bob (sans Spyro's Adventure), Nightmare Mode becomes a permanent difficulty once it has been selected. But in games developed by Vicarious Visions, it is a temporary difficulty choice.
In SuperChargers, you get Nightmare Mode straight from the box.
Nightmare is commonly symbolized by Kaos, but in SuperChargers, it is symbolized by the Sky Eater.