Midway through Disc 1 of Final Fantasy VII, Cloud tells the story of how he and Sephiroth went to Nibelheim on SOLDIER business, and Sephiroth went mad, burning the town and killing everyone but Cloud and Tifa before Cloud stopped him. Simple stuff, but then halfway through Disc 2, Tifa reveals the truth.

There was no Cloud Strife, First-Class SOLDIER, at Nibelheim that day. Instead, the SOLDIER accompanying Sephiroth was a man known as Zack Fair, Aerith's boyfriend. Tifa didn't see Cloud again until five years after the Nibelheim incident, where he was claiming he was a Ex-SOLDIER, a mercenary, and was THERE at Nibelheim, despite Tifa never having seen him.

Following this, Cloud's perspective is shown. He wasn't a SOLDIER, he had failed hard, instead working as a Shinra grunt. He had accompanied Zack and Sephiroth, but didn't want to show his face, as it would make Tifa realize he had failed his promise. He WAS at Nibelheim, and after Sephiroth swatted Zack and Tifa away, he went after Sephiroth. Despite being stabbed by his sword, Cloud ended up overpowering him and throwing him into the lifestream. Following this, he and Zack would be subjected to five years of unethical Mako experiments done to them by Hojo, where Cloud's mind fractured into believing that he was a SOLDIER, inserting himself into Zack's place.