Coleridge creates a sense of horror though his descripition of the lady life-in-death.
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Death and Life-in-Death are allegorical figures who become frighteningly real for the sailors, especially the Ancient Mariner, whose soul Life-in-Death "wins", thereby dooming him to a fate worse than death. Even those sailors whose souls go to hell seem freer than the Ancient Mariner; while their souls fly unencumbered out of their bodies, he is destined to be trapped in his indefinitely - a living hell.
Life-in-Death, who takes on the form of an alluring naked woman, represents perpetual temptation. Because she wins the Ancient Mariner's soul, he is doomed to die only when he has paid his due...perhaps never. As we learn later, the Ancient Mariner is cursed to continually feel the agonizing compulsion to tell his tale to others; although telling the tale allows him temporary relief, he may never be free. First, he and the sailors are denied the satisfaction of drinking; now the Ancient Mariner will be denied the satisfaction of being able to die. His spirit is trapped in his own body, in an excruciating state of limbo - the realm of Life-in-Death. His "glittering eye" suggests more than madness; it is also a synecdoche representing his soul, which longs to be released from living death. It yearns to fly out of his body like the two hundred other sailors' souls did. In fact, when the sailors' souls are released, they fly past the Ancient Mariner with the same sound as the arrow he shot at the Albatross. Initially, the Ancient Mariner is relieved to have survived his shipmates, but in retrospect the sound tantalizes him, as it reminds him that his impulsive sin is the reason for his torture.
Part 3 introduces the theme of imprisonment. As we have said, the Ancient Mariner is doomed to be trapped in a state of deathlike life; his own immortal body is his prison. The ship itself is a prison for the sailors when there is no wind to carry it. Even before the ghost ship comes near enough for the Ancient Mariner to see its crew, it seems to imprison the very sun with its masts. This symbolizes Death and Life-in-Death's level of power; they have so much sway over the natural world and its inhabitants that they can jail the sun itself. The natural world seems to have this power, as well: the sailors are trapped in the "rime" by impenetrable ice until the Albatross sets them free. For this reason, many have interpreted the Albatross as Christ, and the Ancient Mariner as the archetypal sinner. The Albatross has the power to guide the sailors just as Christ has the ability to guide men's souls to heaven. By sinning on impulse, the Ancient Mariner ruins his chances at salvation, and is condemned to the eternal limbo of Life-in-Death. This interpretation implies that every time a person sins, he destroys his relationship with Christ and his chances of reaching heaven, and must redeem himself through acts of atonement. Just as people wear crucifixes around their necks to remind them of Christ's sacrifice and their responsibility to him, the sailors hang the Albatross around the Ancient Mariner's neck to remind him of his sin.