From Wikipedia:As it turns out, Freddy is indeed back. Kincaid wakes up one night, only to find himself locked in the trunk of an old junked car. When he opens the hood, he realizes that he is in a salvage yard - the same one that Freddy's body was buried in. Kincaid spies his dog, Jason, digging and urinating in the ground nearby. The ground begins to shake and the plot where Freddy lies begins to sink deeper into the ground and open up. Inside the grave, the bones begin to grow flesh.Then Freddy is back.

Actually the reason Freddy is back is because Kristen has the ability to bring people into her dreams, so when shes talking to the little girl, and asks where Freddy is.. she unwittingly brought back Freddy.