I think it could mean different things on different levels. In the story I see it as the contradiction Ennis has, having been indoctrinated by his father that he was not a queer, and the realization he was attracted to Jack. That conflict is that space, he knew being a queer could get you killed, he tried to believe he could sublimate himself, his life, taking low playing jobs, denighing himself the comfort of Jack at his side because he didn't feel he could face up to the reality and responcibility. There is also the conflict he feels as he gets the news, accident or tire iron? He tried to believe, but he will never know for sure. There is also that panel of the dream, that he does not force his attention to.
You ever have an idea in your head and the more you try to describe it you feel it slip away like someone pulling a pillow out from under your head?
For readers and viewers that space is the unanswered questions. Did Jack really leave Ennis? Was it murder or accident? We know how we feel, but we believe we can do better. I think we are always trying to believe something.