If you don't know, the game takes place on an alien planet that an ark ship of humans crash land on after fleeing from Earth which was destroyed in an alien war.
When the game was first revealed people thought it was odd that the characters were so athletic. You could sprint super fast and could jump so high, much higher than in the first Xenoblade game. Some said the gravity of the planet Mira was just less, others said it was just a game mechanic. Another thing is there's no fall damage unlike in the first game as well. In fact, at the start of the game, Elma blatantly tells you that you can survive a jump from any height which doesn't really set off any alarms because the player just assumes she's switching to 4th wall breaking video game speak like when a character says "press A to jump."
Then in Chapter 5, you get your arm blown off by a laser blast and realize that your innards are all mechanical. It's a crazy scene as the other characters don't seem shocked at all while your character is just mystified by what's happening before they pass out. So you're thinking "wait, I'm a robot?!" and then Elma tells you that actually everyone is a robot. In order to travel the vastness of space to find a suitable planet for life, people knew their bodies might not make the journey just due to age. So they put their bodies in stasis and linked their minds to robotic look-a-likes of themselves that they control. So all the human characters you've met up until this point are machines and their real bodies are asleep in the Lifehold which is the thing you've been searching for since the beginning of the game. You have to find the Lifehold before it runs out of power and everyone's real bodies die.
This is a pretty early plot twist but it's just late enough that you've gotten a sense of the setting and characters so this twist really just flips everything you knew upside down. I remember having to put the game down for a second and think, wait, what?! The crazy part is, the foreshadowing to this is present all around even beyond how the characters move during gameplay. A lot of it is completely blatant but you don't really process it the first time around. It was mind blowing playing the game a second time before the twist happens and seeing NPCs mention the "mimeosomes" that their minds inhabited.
And if you can believe it, the "everyone is a machine" plot twist has its own plot twist which really fucked me up. At the end of the game, you finally get to the Lifehold which is supposed to be the structure holding all the character's real bodies in stasis. Except there are no bodies. Just a giant super computer and a ton of raw DNA. Turns out, no one was actually put into stasis. They were just put to sleep, had their minds and consciousness digitized and their DNA copied and stored. Then they simply left behind the original bodies behind to perish as the Earth blew up. So the idea is that they can only carry so many humans in an ark ship but they can carry many more digitized consciousnesses of humans as they're just data, find a new planet, then used the copied DNA to recreate the bodies of the people and plant their digitized minds back into them. It really changes the idea of what the characters truly are. Are they the same people as before or are they just a computer mimicking people that used to exist? Is there a soul and does it even matter? It's a really crazy plot twist.