The title—Splendors and Glooms—comes from the novel's epigraph (so check out "What's Up With the Epigraph"), but it's also mentioned in a scene where Clara is a puppet and watching Parsefall work the puppets and strings:
When he played upon her strings, Clara glimpsed the splendors and glooms that haunted his mind. She shared his appetite for prodigies and wonders, for a world where spangles were stars and skeletons frolicked until their bones fell apart. (25.2)
The idea is that all of the characters in the story are more multifaceted and complex than you see at first glance. Even though someone like Clara—a spoiled girl from a rich family—seems like she has nothing in common with Parsefall, they actually understand each other very well. They both carry sorrow and passion (or splendor and gloom) inside them, and both are damaged by their pasts and compelled to do more with their lives because they've seen so much hardship and sorrow.