Arousal is not a strict binary state. It seems like everyone treats arousal like you’re either completely turned off or that you’re fully wet and/or erect or whatever. But it’s not so much an on-off light switch as it is a dimmer knob. There’s an in-between area, too.
Arousal is a synonym for awakening, so you can sort of think of this in-between area as that half-asleep grogginess where your alarm intrudes on your dream and you’re sort of awake and sort of asleep. If you use three-coffees-in wired as your benchmark of awakeness, you’re still asleep, but if you use deep delta wave level sleep, you’re totally awake.
Often, people will pass from one end of the arousal continuum to the other fairly rapidly. But sometimes, they’ll end up in this middle ground and bounce around there for a while, drifting between more aroused and less aroused. Maybe it will fade away, maybe not.
There’s also (at least) two distinct components to arousal. There’s the physical response (where the blood flows to various bits and fills them up, and things like self-lubrication may occur), and then there’s sensitivity (where the area reacts to touch more or in a different manner). These two usually go hand-in-hand, but it’s possible to experience any combination.