This is probably my favorite of the David Lynch films I've seen. It gave me nightmares. Most people I know saw Lost Highway and wrote it off as nonsense. This could be true, but I think it can be interpreted a few ways to form a coherent meaning. I'll try to explain my personal interpretation.

Do NOT read this if you haven't seen the film or plan on seeing it

The film begins by introducing the two supposed main characters, Fred and Rene, whose marriage(as well as their sex life) has begun to collapse. Fred gets paranoid and starts to suspect that Rene is having an affair with someone (it later turns out that she's cheating on Fred with Dick Laurent/Mr Eddy). Fred doesn't take this well, and decides to deal with their infidelity by murdering Rene. My guess is that he was influenced or possessed by the "mystery man" before the act took place. Fred is caught and imprisioned where he seems confused and disoriented. This is where the film takes a sharp turn. While in his cell, Fred complains of a severe headache. He looks up at the ceiling of his cell and sees the blue light seen in many other Lynch films. The next morning, a guard comes to check his cell and sees another person in place of Fred. Since it's not Fred in the cell, they release him. The story starts off from here with a new line up of characters as if everything before this point had never ocurred. I think this is the beginning of a fantasy. Fred's fantasy, made real by the "devil man". Fred becomes Pete (a young mechanic), and Rene becomes Alice. Pete and Alice have a relationship that is everything that Fred and Rene's wasn't. Alice is cheating on her gangster boyfriend (Mr. Eddy) for Pete, instead of vice versa. Their relationship is dangerous and passionate. Eventually, things change. Pete begins to see things in Alice that he hadn't seen before. He discovers her history in pornography. Her characer becomes unpredicable and irrational. Despite this, the two attempt an escape into the desert. A sex scene follows where Pete tells Alice that he "wants her". Alice replies "You can't have me". Fred sees that his dream has gone awry and awakens. Alice retreats into a creepy wooden shack and disappears. Pete disappears as well, replaced by Fred. In the end, Fred kills Dick Laurent/Mr. Eddy out of jealousy and to avenge his shattered relationship. The final scene shows Fred fleeing from the police, finally understanding how the mystery man has been driving his actions from the beginning.

It seems that this film is about giving into temptation when it arises. Fred was overwhelmed by his anger and jealousy, which were fueled by the suggestive mystery man. Unfortunately, Fred was unable to resist his urges. The only character to come out on top in this story appears to be the orchestrator of the strange string of events.