Although popular culture has rammed in the notion of the Third Reich being a totalitarian police state manned by a ruthless secret police, the reality is that the Gestapo was far from its image of a well-oiled machine for terror. These agencies were sometimes underfunded and understaffed, and there was a significant pressure from below making denunciations. Terror from above existed, but it was not the only thing making Germany a police state.

How the Gestapo and other agencies of the SS functioned in German society though is more contested. Peter Lambert's essay "The Third Reich: Police State or Self-Policing Society?" in the anthology Everyday Life in Mass Dictatorship gives a good run-down of the evolution of the scholarship. Lambert in particular looks at the recent work by Robert Gellately and Eric Johnson, who have added much to the historical analysis of the Gestapo and police terror. Their corpus of work (eg Backing Hitler, The Nazi Terror, various articles in journals and anthologies, etc.) is a good place to start. Nikolaus Wachsmann's Hitler's Prisons: Legal Terror in Nazi Germany and KL: A History of the Nazi Concentration Camps impart a good understanding of the end point of terror, as well as its less than straightforward evolution. The anthology The Law in Nazi Germany: Ideology, Opportunism, and the Perversion of Justice examines the co-option of the legal profession into an instrument of terror and complements Wachsmann's books. The RHSA has recently been the subject of several fine books. Michael Wildt's An Uncompromising Generation is an excellent survey of this institution. Wildt's other book, Hitler's Volksgemeinschaft and the Dynamics of Racial Exclusion, is also worth checking out for the thorny issue of mass participation in violence and terror. Robert Gerwarth's biography of Heydrich, Hitler's Hangman filled in a much needed gap in the scholarship that had been taken over by more sensationalist biographies that took Third Reich gossip as a given. Peter Longerich's biography of Himmler is a door-stopper, but it contains a lot of useful information on the head of the SS. Finally, Nathan Stoltzfus's recent book Hitler's Compromises takes the somewhat heterodox position that the Third Reich was after its consolidation of power much more in line with so-called "weak" dictatorships and used a mixture of soft coercion, strategic compromises, and existing social pressures to make the dictatorship function. It's a somewhat controversial thesis from what I have read and I'm not entirely convinced, but it is an interesting counter to the stock image of totalitarian terror.