dream world..........it was at the end of the dream that Lori and Jason both shared (don't ask me how they shared the same dream) while sleeping in the van on the way to Crystal Lake.
It started as Lori was walking through the camp.......sees all of the kids picking on Jason as a kid.......he goes into the water......Lori goes to a councilor (who is fucking) for help........that councilor is Freddy. Freddy jumps in and starts holding Jason down. In the real word, the van crashes.....which wakes Jason up leaving only Lori in the dream with Freddy. Freddy shoots out of the water onto the dock, looking like Darth Maul.
Jason is in the van because:
Freddy possessed one of the teenagers (ala Nightmare 2) while he was sleeping.........Freddy used the kid's body to shoot Jason full of traquilizers. This of course put Jason out.......allowing Freddy to fight Jason in the dream world.
Meanwhile, the kids have hatched a plan. They put Jason's sleeping body into their van to drive him to Crystal Lake. The plan is to take Jason to Crystal Lake then pull Freddy out of Lori's dream so they can fight in the real world.
The kids want Jason to kill Freddy. If Jason wins, Freddy is dead and Jason will already be home (Crystal Lake) so he won't follow and kill them anymore.
As I said, Jason wakes up when the van crashes. During the crash Jason is thrown from the van.......that is why he doesn't just raise up and kill her.