I like someone's read yesterday, that the UFO represents the bigger picture that many of the characters have been ignoring while focusing on the petty stuff going on between the gang war. Betsy is dying of cancer, Vietnam vets are getting fucked up, Reagan is getting ready to screw the country yet people are buying his bullshit, Ed and Peggy are so self absorbed in their own shit they don't realize their marriage is broken, fucking UFO's ARE FLYING AROUND. Yet all anyone cares about is this senseless turf war and the violence it's causing. No one is paying attention to the actual problems around them. Even in the moment it appears, people can only gape at it for a moment before resuming their shit, Peggy not even being phased.
And I'll reiterate that the UFO also represents that violence and death, as it only appears around it. It's a gawker at human stupidity, not interfering, but watching as the humans below fuck up. So yes, it also represents us as the audience in that way.