A few years ago, a Taoist practitioner told me that Luzu (呂祖) appeared again in Taiwan meeting some Taoist gurus, a demonstration that Luzu is still "hanging around" and helping people. I tried to discuss the psychological significance with this guy, but he was furious, and end of discussion!
Why so furious? A conflict with his belief-system, one well-known in Chinese popular culture (actually forming the foundation of the well-known practice called Feng Shui 風水). Chinese (as per popular [Taoist] Chinese culture) believe that there are spirits hanging around in our physical world. These spirits can broadly be divided two kinds: One Yin (陰) in nature and one Yang (陽) in nature. They are staying behind for various reasons. The former can do mischievous acts while the latter can do beneficial acts to human. And Taoist Immortals belong to the latter category (actually some choose to hang around, some choose to leave the physical world altogether: out of their own volition).
Under what conditions can one see a spirit, according to popular belief? When one is consumed with Yin (e.g. "having bad luck" 時運低, or simply born like that),one will likely to see Yin-spirits and probably be tricked by them. And when one is saturated with Yang (as per higher level of Taoist meditation seeking to build a fully-saturated Yang-body: the gold or diamond body), one can see Immortals, and probably can also take lessons from them too!
In popular belief, seeing means physically seeing by one's eyes in broad day-light (well, perhaps may be darker sometimes). It is interesting to note that it is quite unlike Jungian psychology's seeing spirits as a psychic reality (vs. a guru can actually and physically see Immortals). And ordinary folks seeing spirits in broad day-light is called early-psychosis (思覺失調) by Hong Kong's medical profession (vs. a common guy seeing bad spirits because of bad luck or those who are born to be saturated with Yin-energy [陰人；陰氣重的人]).
One very interesting point arises here. Oftentimes it is those who are seeing bad spirits that will seek help. The Chinese way is like this: Option one: see a Feng Shui master to fight the evil spirit (i.e. not to change oneself, but to increase protection by some physical means). Option two: Diligently follow religious rituals (either Taoist of Buddhist) to raise one's Yang chi (陽氣), that usually involve an organized lifestyle with prayers, fasting, repenting and physical exercise (not necessarily all). The options are not mutually exclusive. It is worth noting that deep meditation is NOT recommended. Deep meditation is only meant for those who are with a strong Yang trying to progress into a state of fully saturated Yang (純陽). Meditation by the Yin-guys will likely attract some bad spirits!
Learned readers can readily see that the above "treatment method" goes well with modern theory of clinical psychology or psychiatry. And no wonder from time to time we read accounts of young people from the West who had a troubled soul went to do deep meditation in isolated monasteries and got their conditions worsened. They will be seeing bad spirits rather than meeting Immortals. They should have listened to some good advice first!