The gameplay in Knights in the Nightmare is harder to explain than the story. It is real-time strategy combat, but it is unlike any other game you've ever played because it is an entirely new take on the genre. You control the wisp in battles, and it is your job to recruit knights (by finding and giving them key items), and possess them to make them attack.
In order to kill enemies, the knights have to be equipped with certain weapons that you choose at the beginning of each round. The weapons will correspond to certain classes and either Law or Chaos. During battle you can change which rules the battle, Law or Chaos, to use the weapons which correspond to it.
Also, the knights don't really take any damage, but you, the wisp, do. So you have to dodge enemy bullets (they take time away from your battle, not HP), provide the knights with the weapons they need to use to attack, power up their attacks and wait for the enemies to be in range since the knight's themselves can't move. In order to win a battle you are given a set of goals to accomplish, such as getting a certain number of kills, and the amount of moves you get is set at the beginning of battle as well. Also, each turn is timed and when you run out of time you get the start the next turn.
You control the wisp with the touch screen, although the action is actually taking place on the top screen.
If it sounds confusing, it is. But there is a nice tutorial section at the beginning of the game that shows you everything in graphic detail. And you'll need it. Learning to play this game is important since it is so unique, but it is worth it.