The film starts with a beautiful brunette (Laura Elena Harring) travelling in the back seat of a limousine along a mountain road in L.A. The car stops and the man in the front passenger seat turns to point a gun at her. Then, before he has a chance to do anything, a speeding car comes round the corner and there's a terrible accident. The brunette wakes up and stumbles, dazed, down the hill and into an apartment whose elderly lady owner is just departing for a holiday, but whose pretty young blond niece, Betty, (Naomi Watts) is coming to L.A. for the first time to stay there. She arrives, finds the brunette, and slowly gets wrapped up in a quest for answers with this femme fatale type, who can't remember her own name but calls herself Rita after seeing a poster for the Rita Hayworth picture Gilda. The only clue is that she's carrying a bag full of money and a blue key.
Meanwhile a young movie director has an unsettling meeting with some mafia types who want to force him to hire a certain actress against his will for the lead role in his movie. They have strange habits - like spitting espresso onto their napkins. And there's a creepy guy called 'The Cowboy' who keeps cropping up. And there's a guy in a diner who had a dream about meeting a horrible figure at the dumpster behind the diner. And there's the hit man who's in the office of what seems like his friend but things get weird because of a little black book. And much more. This is all in the first two thirds of the movie. Things reach a head soon after Rita and Betty have made love, gone to an apartment which Rita thinks might be her own (after seeing a waitress called Diane in the diner jogs Rita's memory) and found a dead girl. They then visit a club at 2 am to see strange people perform in several foreign languages and Betty finds a blue box in her handbag. They rush home to open the box with the blue key....then it gets really weird!
In the interviews that come with the DVD it's said that this film should be regarded rather like a book by a writer who's now dead and left no clue as to its meaning. You, the viewer, need to work this one out for yourself. Some may find the last third of the movie simply baffling. Rita and Betty are now both completely different characters, it seems....and yet there is definitely a connection with what they previously seemed to be. On second viewing I started to put together some clues. The scene in the diner where Betty pays the hit man to kill Rita (who's now a cruel partner teasing her by passionately kissing the movie director in front of her), and the waitress who was previously Diane is now called Betty, and the guy who had a dream is looking on, seemed to be crucial....though I'm not sure why. Perhaps the events in the first half of the story came after those in the second half- or some of them did and others didn't. Perhaps we're now discovering what really went on in the first half. Certainly it seems by the end that the overall point of the film is to tell the sad story of how obsessive love destroys the Naomi Watts character.
The music, the photography (it's one of the great L.A. movies), the dark humour throughout mean it's always an enjoyable experience even if you don't understand what's going on. Fans of Twin Peaks and Blue Velvet will kind of know what to expect. But for David Lynch it was a step forward too.