"Way Down in the Hole" is a fire-and-brimstone gospel song. Waits' lyrics are frequently ambiguous, but in this case the song is actually pretty straightforward. Most of the Frank's Wild Years album is sung from the perspective of Frank, the character whose story is told in this album (which was also a soundtrack for a play by the same name).
Waits gave us the key to this song in 1987 when he talked to the New York Post. "That's Ralph Carney on three horns simultaneously," he said. "We wrote that one real fast; it was practically written in the studio. Checkerboard Lounge gospel. Here, Frank has thrown in with a berserk evangelist."
So, with "Way Down in the Hole" we're actually hearing from a "berserk evangelist" trying to convert Frank, who has struck out into the world foolishly to find fame and fortune and who likes booze, drugs and women.
The opening line, "When you walk through the garden," may refer to the Garden of Gethsemane, which is where in the Bible Jesus prayed on the night before being betrayed and taken to his death. The event is known as the Agony in the Garden of Gethsemane.
"Way Down in the Hole" was the theme song for the HBO series The Wire, which ran from 2002-2008. Each season used a version by different artists, including The Blind Boys of Alabama, Tom Waits, The Neville Brothers, DoMaJe, and Steve Earle. "Way Down in the Hole" was used for Season 2.