They are dead after a car crash and they are ghosts us (the reader) can see them but the dad cant. The ghosts are all faded thats how u can tell they dont know there dead yet.
Basically he’s still talking to his family but they died because of the crash so he’s talking to ghosts (hence why the family is light gray) . manny is telling him to move on but the dad is ignoring him by saying “good one”