Final answer:
The townspeople described Uncle Otto's mental decline through his restless and terrified behavior, as well as his superstitions about his mansion's influence on his spirit.
Step-by-step explanation:
Two examples of the townspeople describing Uncle Otto's mental demise include observations of his changed behavior and superstitious beliefs.
The first description highlights a stage where he roamed aimlessly with a tremulous voice marked by extreme terror, no longer maintaining the same lively eyes or engagement in ordinary activities. The second example relays his entrapment by superstitions related to his family mansion, suggesting a psychological impact from the physical environment contributing to his distress.