WHAT IS HE, a director or a pervert? It's for him to know and us to find out. In Inland Empire, David Lynch studies the fear, rage and sorrow in the distorted face of a woman. He watches with the same keen observation with which Picasso studied his weeping mistress Dora Marr. Laura Dern's contorted face interests Lynch from an aesthetic angle. And Dern's emotions are the central obsession that drives this supremely baffling anti-film.

It has been well publicized that not long ago Lynch was promoting Inland Empire on a vacant lot in Los Angeles, mounting a one-man (plus one-Holstein) Oscar campaign. The joke is on the Academy. Dern deserves the award for best actress.

In Inland Empire, the rangy blonde plays at least two different characters: a great-lady movie star with a butler, and a raspy street prostitute with a steel tooth. Dern keeps you watching through unfathomable twists and turns and miles of bafflement.

It would take at least three viewings to make up a coherent explanation of what's going on in Inland Empire, and certainly the exegetical work will begin as soon as the film gets released. Ultimately, some sort of a diagram will turn out to be more useful than a description. Lost Highway was a Möbius strip, Mulholland Dr. was a pair of asymmetrical loops. What's this one shaped like: an asterisk?

In the mansion of actress Nikki Grace (Dern), a new neighbor comes to visit. ("Neighbor" is a loaded word in Lynchese, it's what Frank Booth called Jeffrey in Blue Velvet.) The neighbor (Grace Zabriskie) has a few words to mince. With the poisonous insinuation of Bela Lugosi, she starts to interrogate Grace about her new movie. And then she starts to relate an old folktale about the origin of evil: it was a little boy's reflection that one day walked off with a life of its own.

Inland Empire's largest loop begins as Nikki commences work on a new film, starring as an adulteress in On High With Blue Tomorrows. Her co-star (Justin Theroux) is the supposedly irresistible actor who always seduces his leading ladies. It looks like history will repeat itself, despite the fact that Nikki's husband has a lethal reputation that scares everyone in the industry. And then On High With Blue Tomorrows' director (Jeremy Irons) has to spill the beans—the movie is based on a never-completed Polish movie that, eh, killed its stars.

During the early stages of production, On High With Blue Tomorrows changes. The sets come to life and swallow Nikki up whole and transport her to some place in L.A.'s trackless suburbs, the Inland Empire. With the help of Lynch's usual team of retainers, Aphasia and Amnesia, the actress morphs into a snarling Hollywood Boulevard whore called Susan Blue.

(Fictional character that she is, Susan seems to know she's in a movie within a movie, and so she mocks Nikki: "I'm a whore!" Susan howls, derisively. "Where am I? I'm soooo scared!" This certainly could be read as a parody of Charlize Theron in Monster, or perhaps any fancy that a pampered actress could understand what a street hooker goes through.)

Even after he moved away from linear narrative, Lynch's films used to suggest which way the power was flowing. Previously, there was some idea of cause and effect. In Inland Empire, one clue is the tale of a circus and one of those B-movie mentalists who can hypnotize an innocent into killing. And part of the film takes place in Poland, where we see authentic forlornness, peeling paint and unlit stairwells, suggesting that Dr. Caligari must be still practicing medicine.

It is tragic that the director who gave us the fragrantly erotic surfaces of Blue Velvet and Mulholland Dr. is reading film the riot act. ("I'm through with film as a medium. For me, film is dead," he writes in his new book, Catching the Big Fish.)

Inland Empire brings out previously unseen ideas of what one can do with the small camera. There have been exciting moments in digital film: the flat patches of haunted darkness in The Blair Witch Project, the fields of flood-lit color in Bubble, the nimbus of goldenrod light around Chloë Sevigny's head in Julian Donkey-Boy.

All these films seem mostly serendipitous compared to what Lynch achieves with a far from state-of-the-art Sony PD-150. The grain, the stuttering image when the camera is tracked and the flurrying specks in dim light are perfect for an exercise in trying to re-create what's seen by the eye of the subconscious.

Inland Empire is a long version of the dream sequences we usually have to pay for with a dull movie. And in this dim, threatening format, Lynch appears to be leading the pack instead of following it.

But again Lynch also seems to be displaying some deep ambiguity toward the recording of pictures and sound. What else can he mean by that folktale about the boy and his image parting ways? The film's first image is the harsh snap of a klieg light coming on (it's also potentially an old arc-light powered film projector).

Then there's a close-up on an old acetate disk recorder, such as were used for radio transcriptions. Toward the end, the film comes to a point where a commonplace trick of cinema—a character created by an actor—reverses the natural order of things. The character survives and walks off on its own. The actor vanishes into nothingness.

Does Lynch see some kind of necromancy in the way that cinema can make the dead walk and sing and dance? Does he feel that there's a heavy reckoning waiting for those who seize this power? If not, there's something else in him that knows how to make cinema dirty and scary and threatening again.

Lynch prides himself on his Eagle Scout manners, but as an artist he is ruthless. His willingness to linger on a growing sense of fright makes him the living master of horror, even without shocking material. Except for The Straight Story, he's never made a movie with this little sex or violence. If it weren't for the language, and a clinically filmed topless scene—perhaps contractually obligated—there's hardly anything in Inland Empire that couldn't be rated PG.

Through mood alone, Lynch can play a viewer's spine like a xylophone with pure psychological terror and give the sense of reality eddying away as one watches. Inland Empire did my brain in.

Inland Empire (R; 172 min.), directed and written by David Lynch, photographed by Odd-Geir Saether and starring Laura Dern, Grace Zabriskie, Justin Theroux and Jeremy Irons, opens Feb. 9 at selected theaters.

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