The pile of corpses at the concentration camp isn't one of the lovelier images in Life Is Beautiful, but it's one of the more memorable. You're probably a few steps ahead of us on this one, but we'll lay it out there all the same: this image represents the staggering toll of death and misery during the Holocaust.
Guido comes across the sight the evening of the dinner party. Dr. Lessing has proven a lesser man than Guido hoped by not offering any help. Leaving the party, Guido wanders in the fog with his sleeping son in his arms.
Comforting the boy, he says, "Where are we here? I might have taken the wrong way. Good boy, sleep. Dream sweet dreams. Maybe it's only a dream! We're dreaming, Joshua." When he turns the corner, he comes across a mountain of corpses.
Now, any historian will tell you this is an ahistorical image. The Nazis didn't usually leave piles of their victims lying around. In order to hide the evidence of their crimes, the Nazis buried their victims in mass graves or burned the bodies in the crematoria. Later, as the Allied forces advanced across Europe, orders were given to go as far as to exhume the mass graves and burn those to ash as well (source).
But this scene is meant to be more symbolic than factual. The pile of bodies looks like a medieval painting of hell . The Holocaust was a type of hell on earth, and the parallels in the imagery could certainly be seen as representing such incalculable suffering.
Adding to this reading is the journey through the fog, which suggests Guido leaving the physical world to a place more mystical in nature.
Alternatively, the imagery could be a look into Guido's psyche. Note that Joshua's asleep and doesn't witness the horrific sight. Only Guido sees the full extent of the horror. In this way, we could see this as the toll the "game" is taking on Guido.
His son remains blissfully unaware of the suffering of the Holocaust, as if in a dream, while Guido bears the terror of the situation alone. Faced with such unimaginable pain and suffering, he does what he can and keeps moving.
It's not all fantastical, though. When the Red Army and the Americans reached some of the abandoned death camps in 1945, they did find piles of bodies left behind in the Nazis' haste to abandon the camps. Supreme Allied Commander and future prez Dwight D. Eisenhower made it his business to visit one liberated camp:
The visual evidence and the verbal testimony of starvation, cruelty and bestiality were so overpowering as to leave me a bit sick. In one room, where they were piled up twenty or thirty naked men, killed by starvation, George Patton would not even enter. He said that he would get sick if he did so. I made the visit deliberately, in order to be in a position to give first-hand evidence of these things if ever, in the future, there develops a tendency to charge these allegations merely to "propaganda." (Source)
We knew there was a reason we liked Ike.