We’re referring to the slightly morbid dorm-room décor which Charles has lying around early in Book One. We might have missed it altogether if Waugh hadn’t rather pointedly entitled Book One "Et in Arcadia Ego" and told us to look closer.
The phrase is Latin and literally translates to, "And in Arcadia I am." (The "to be" verb is implied.) But it is most often translated to reflect its meaning and not just its words, in which case it reads, "Even in Arcadia I exist." ("Arcadia" is another word for a pastoral paradise.) The quote is famous as the title of this painting, but Waugh likely had this painting in mind instead. There are different ways to interpret the line. It could be that a dead person is speaking it – "even in Arcadia I existed," as in, "even though I’m dead now, I used to live happily in a paradise of green grasses and such," or it could be that death is speaking it, as in, "I’m around threatening to end your life even when you’re in paradise."
This second one sure makes for an ominous reading of Book One of Brideshead Revisited. Charles is in Arcadia, but the threat of death (and the very tumultuous Book Two) is ever-present. Of course, considering that we get hints of Sebastian’s depression and straight-up prophecies of his impending alcoholism every third page doesn’t exactly help either. On the other hand, the first interpretation fits nicely with the image of Charles the narrator, now essentially ‘dead’ since he is loveless, childless, middle-aged, etc., looking back on the Arcadia in which he once existed.
The word "Arcadia" also has a religious connotation, which sadly we cannot ignore when talking about anything in Brideshead Revisited. Charles says that he "believed [him]self very near heaven during those languid days at Brideshead," so here is yet a third interpretation of the phrase, this time viewing "Arcadia" as a very specific paradise: heaven. Remember how we talked in "Character Analysis" about Charles using art to replace religion? Right, well here he is using youth to replace the Catholic concept of heaven. Lends a little support to that title addendum "the Sacred and Profane Memories," doesn’t it?