Lost Highway is the best film David Lynch has made before or since his masterpiece Blue Velvet over a decade ago.

It is also this tight-lipped director's most elaborate, tangled, senseless movie since midnight favourite Eraserhead. It is as though the commercial excitements of (the badly aged) Wild At Heart and almost popular TV success Twin Peaks never happened. It has been a long time in coming -- four years since the ill-stared but criminally underrated Peaks movie -- but Lynch has finally returned to his dream-driven Surrealist roots to make arguably the most obscure and alienating 'mainstream' movie of the last ten years. Lost Highway is not in the business of taking prisoners.

Los Angeles. Meet sax-man Fred Madison (Bill Pullman) and wife Renee (a dark haired Patricia Arquette). One morning the door buzzer sounds and he is told, 'Dick Laurent is dead.' Later she finds a video-cassette showing a grainy black and white film of the outside of their house. They are disturbed but put it down to real estate agents. Until it happens again, the camera floating high through rooms and down corridors to watch the couple sleep. This time they summon a baffled police department.

At a party Fred meets the Mystery Man (Robert Blake). Bulging of eyes and steady of voice, he reminds Fred of their previous meeting, telling him that he is currently inside the Madison home. Fred rings his own number and is answered by the chalky-faced stranger.

Fred watches the third tape alone. It repeats the process, but ends with him sitting amongst the bloody carnage of Rennee's murder. Fred is convicted and imprisoned.

Opening events in Lost Highway are surely amongst some of the blackest, most unnerving cinema ever created. We can call the Madison house a home, but the interior design is immediately recognisable as Lynch-land: that same crepuscular retro-fifties world he forced on poor Jeffery Beaumont in Blue Velvet. The furniture offers us just the wrong angles, the rooms are just too empty, the lighting inadequate throughout. Consequently we cannot connect ourselves to this place, we feel disoriented, screaming for a flashlight and noise. In this place a telephone ring echoes like a fire bell. Fred and Renee don't so much live here as inhabit a terrible space.

As a result, when Lynch's camcorder seeks to disconnect Fred's reality, we slide into pure horror. The videos distance any comfort, any sanity. It is bad enough that Lynch concentrates on those red drapes normally, but in gritty monochrome they become something truly other. The tapes are short but even murder comes as light relief. Lynch's films have always been ones of other places behind the visible, and this is no different. Witness the frankly terrifying moment where Fred is swallowed by the sucking black shadow that hangs in the corner like a threat. The film is heavy with sepulchral dread.

The opening is intensely languorous. Even the conversation with two police detectives is pregnant with more pauses than words; what Video Watchdog magazine calls Lynch's 'creation by omission'. He uses the space it offers to push the envelope of his sound design to the extreme, be it the background industrial throb of the earlier pictures, the insinuating chords of regular composer Angelo Badalamenti, or the brilliant use of This Mortal Coil's 'Song To The Siren' (originally earmarked for Blue Velvet) as a love theme.

It is a mark of its achievement that the remainder of the picture never quite again captures the same terrible beauty of this extended prologue. For, as Fred languishes in gaol, beset by terrible headaches, things take a twist beyond odd. Checking the prisoners, a guard notes with alarm that Fred's locked cell is now occupied by 24-year-old motor mechanic Pete Dayton (Balthazar Getty). No rhyme, no reason, and certainly no explanation. He is released.

Gradually Pete recovers but still has no idea what happened. At the garage where he works he is favoured by vicious local gangster Mr Eddy (Robert Loggia). Unfortunately he also catches the eye of Mr Eddy's blonde moll, Alice Wakefield (Arquette again), and the two begin an energetic affair.

This second strain is more recognisable for the influence of Lynch's co-writer Barry Gifford. He of course wrote the original (and superior) novel from which Wild At Heart was culled, and went on to script Lynch's short-lived (and frankly risible) Hotel Room. Gifford is arguably the world's best, most literary noir novelist, and certainly the later scenes of Lost Highway are littered with both noir and Lynchian archetypes: Pete is the corrupted innocent (think young Master Beaumont again); Mr Eddy malign but seductive (Frank Booth, Bobby Peru); and Alice the provocative femme fatale (Dorothy Valens, Peridta Durango). It's just the mixing and matching here that strays beyond the simple confines of obvious sense.

The film is littered with what writer and lecturer Michael Atkinson calls Lynch's 'free-associative conceptualising'. What logic it offers both confirms and contradicts. We get no easy in nor out and are left, as Lynch wants, simply accept the ride. Are the Pete sections a flashback to Fred's earlier life? Does the violation of his house visualise the violation of his mind? Is one half simply a dream? And which? By the director's own (very precise) estimation, 96% of the audience will 'get it', but only one person in the film itself seems to know: Pete's father, impressively essayed by Gary Busey. At one point he mentions 'that night', but steadfastly refuses to elaborate. Possibly the Mystery Man knows, but like the little man of Twin Peaks, he is from Another Place entirely.

Doppelgangers suffuse the film. Pete/Fred, obviously, and Alice/Rennee, but it's the Mystery Man's ability to be in more than one place at once, the fact that the police recognise Mr Eddy as the mysterious Dick Laurent, or even photographs that appear to show Alice and Renee together at one time, and something entirely different at another. Ask Lynch what it all means and, gee golly, he doesn't know. There is even less explanation for these doublings-up than for Kieslowski's Double Life of Veronique or Medem's recent Tierra. Lynch has always been a painter: all show and no tell. It's a ride.

Like Blue Velvet, like Twin Peaks, Lost Highway stands outside of obvious genre definitions -- it's contemporary noir, it's a horror film of a whole other stripe, even black comedy. Gifford offers the whole thing as Fred's 'psychogenic fugue', a mental escape hatch when he's unable to assume the full horror of his actions. Lynch, typically, offers nothing. In interviews (try that introducing the published screenplay [Faber & Faber, £7.99]) he will smile and nod at suggestions that his film is about mental disintegration or a meaningless Kakfaian guilt loop, or even (and this is an excellent analogy) that his film is a Moebius strip, with two sides but only one surface. Even he now rejects the script's own definition of a '21st-century noir horror film'. There is a wealth of future university thesis work offered by these 134 minutes.

And that's a snag. No matter how good the film is (and much is exceptional), 134 minutes is much too much. Much as we enjoy Mr Eddy's scary-comic pistol-whiping of a tailgater ('I WANT YOU TO GET A DRIVER'S MANUAL, AND I WANT YOU TO STUDY THAT MOTHERFUCKER'), the film could live on quite happily without. Likewise some of the porn stuff from near the end. And whether or not we need yet another David Lynch headwound (here a glass coffee-table, but think of the desert car smash in Wild, the Yellow Man in Blue Velvet) is debatable.

The details, however, most certainly are not. From the set design to the elaborate soundtrack, the film is astounding. Badalamenti (and this is some of his best ever work) is complemented superbly by Britain's Barry Adamson and a host of perfectly chosen, perfectly pitched songs, from that Bowie tune to Lou Reed and (horror) Nine Inch Nails and (horror of horrors) Goth-shockers Marilyn Manson. What sounds crap on record takes on a whole new life in context.

The performances are excellent throughout. The poor, stunned Pullman and Getty do much more reacting than actual acting, but both are fine, while Arquette shoulders more of the weight and turns in her best performance as a result. Eraserhead himself, Jack Nance, cameos as a mechanic (he tragically died before the film was finished), and a messed-up Richard Pryor appears as garage owner Arnie. Meanwhile Robert Blake (probably best known for the film version of Capote's In Cold Blood) does something extraordinary with the career-defining Mystery Man. He isn't called upon to do much, but like Hopper's Frank Booth, it's a performance of genuine malevolence.

Lost Highway reads like a map with all its names purged: we can see the roads, their connections, but we have no idea where we are going, or even where it is when we arrive. As the film ends Fred Madison reappears to deliver the news of Dick Laurent's death. We appear to have come full circle. Have we? Does it matter? As Fred says, 'I prefer to remember things my own way.' This is Blue Velvet made immediately after Eraserhead -- another Lynch film not so much watched as felt -- and as it closes we are again abandoned, back riding the central reservation with David Bowie cranked-up high on the stereo. Enigmatic, confused, ferocious. 'A terrifying ride down the lost highway'? Absolutely.