Occasionally a street would open up into a small plaza, or a convergence with other streets, where pitches had been set up by puppeteers, music and dance acts, and vendors of everything—divination books, grilled squabs on toast, ocarinas and kazoos, roast ears of corn, summer caps and straw hats, lemonade and lemon ice, something new everyplace he turned to look.
* * * * * * * * * *
I'm not going back on my belief that Pynchon has inserted Lew from outside the novel so that Lew has found himself in a new world but I believe there may be more to it, as described in this passage. Maybe Lew's waking swoon from the previous line literally took him out of Chicago and into this strange carnival-like hidden backstreet. Being prone to waking swoons (as he mentioned), we can extrapolate that Lew had one previously and that's how he came into this Chicago, this America, where he doesn't know the sins of his past. Now another waking swoon has allowed him into this new urban setting, a back alley carnival.
In other words, Lew Basnight has a super power. He's able to shift his perception and see hidden places in reality that others simply pass by without notice. That's probably why he's a valuable observer to Nate Privett's detective agency.
As for discussing the actual text in this line, I think it's just a description of a bunch of things you'd be surprised to find in a back alley in Chicago. Puppets? Divination books? Roast corn? Perhaps in 1893 this was all common but I'm guessing, due to the whole waking swoon bit, it's as uncommon as it would be now.