If you haven't seen the movie, then you may not want to read any further.
The difficulty with the film, according to the many reviews here (and elsewhere), is the structure, with its many plot twists and turns. For those who know Lynch's style, however, you're well prepared for his convolutions, the out-of-sync narrative, the creepy camera work through darkened corridors, the odd-ball characters, the seemingly impossible situations and symbols...
Although, being prepared doesn't necessarily mean ultimate comprehension: Lynch, after all, doesn't go out of his way to help anybody unravel any of his thrillers, particularly the one prior, Lost Highway (1997) and, most recently, Inland Empire (2006).
Mulholland Drive sits between those two, being yet another exploration of how the mind works or how Lynch (and others) thinks it works under the most extreme conditions. Again, based upon the reviews here (and elsewhere), there are many differing opinions just as there are always many interpretations about any work of art. I think it's likely, however, that every artist has a personal interpretation about his/her own piece of work i.e. the one that is true. Recall that Lynch is on record as saying (I paraphrase here) that his films are examples of art in motion. Hence others will no doubt see the truth of this film differently.
Let me briefly discuss the apparent story first. As a longtime observer of Hollywood, Lynch takes a simple premise: what can happen to a young, bright, intelligent girl aching to be a star? That's been done so many times before, it's almost banal: Morning Glory (1933), Stage Door (1937), A Star is Born (1937 and many remakes), All About Eve (1950), Frances (1982), and so on.
Lynch, in his inimitable fashion, turns that premise into a nightmarish vision of seedy power plays between producers, directors and actors, coupled with a gut-wrenching mystery concerning a young woman, suffering from amnesia resulting from a severe auto collision. She has a bag full of money and a couple of hit men after her. She stumbles from the accident and hides in the apartment of a young and hopeful actor. After hearing the amnesiac's story, the actor joins forces with the hapless woman and the intrepid two set out together to solve the mystery of the money and the hit men.
Now, as a story, it works, despite the confusing plot line: it's tense, exciting, mysterious, threatening, sexy, violent, ironic, funny in fact, all those things we all come to expect in thrillers. It's the sort of stuff (the stuff of dreams and nightmares) many directors do well: the late Hitchcock, Scorsese, De Palma, Mann, Friedkin and many others have churned out such for years.
Lynch, however, always likes to mislead and misdirect the viewer's attention from the real story behind the story. So Mulholland Drive, I suggest, has more in common with at least two other films: Donnie Darko (2001) and Jacob's Ladder (1990) and, while I think of it, perhaps also with a nod to Heaven Can Wait (1943), where Henry Van Cleeve (Don Ameche) has another stab at indulging his sexual fantasies before he dies.
The first two films explored the last jumbled thoughts of the central character during the throes of death, while HCW extended the idea to a comedic second chance, and quite simplistically. As we all know, many say that your life flashes before your eyes at the point of dying. So, I think Lynch took that idea and constructed the Mulholland Drive narrative using the last agonized thoughts of Betty/Diane (Naomi watts) as she tried to justify her murderous nature just as Donnie Darko (Jake Gyllenhaal) constructed his fantasy as the 747 engine falls on him, and as Jacob Singer (Tim Robbins) gasps his last on the operating table in Vietnam.
For me, it's the only solution that makes sense, bringing complete narrative closure. The cast and the acting are, as you would expect, up to the demands placed upon them by Lynch: all in all, a superb production and presentation. The violence and sex are never gratuitous, although some may be repelled by the lesbian sex scenes.
As a subtext, Lynch once again implicitly condemns the excesses of the Hollywood system and how it tends to subvert all that is good and fine about the art of film and acting, often resulting in real-life personal tragedy for some participants. But, that's life, more or less, in just about any profession, I reckon. In Hollywood, it's just more visible...
Recommended for all fans of thrillers and a must-see, of course, for Lynch fans.