He killed his wife because she was involved in porn industry with Dick Laurent and Andy. At least Fred suspected something as we saw in the first part of the film through an unbearable tension between him and his wife and his suspicious behavior towards her on the party. We see this almost confirmed through the character of Alice in the second part of the film, who's Renee's doppelganger. She's manipulative femme fatale, slutty and involved in porn industry, everything he suspected Renee to be. Mr. Eddy is Dick Laurent and there's Andy too. He obviously cannot escape this filthy underground world of porn and snuff, and the feeling that he did something horrible or will do it is chasing him in his escape 'reality' and his second identity, Pete.

Mystery Man is a devilish, otherworldly or symbolic figure like Bob in Twin Peaks, or a bum, a cowboy and Blue Haired Lady in Mulholland Dr. In fact, Twin Peaks has an abundance of such figures. Compared to them, Mystery Man is more blurry and ambiguous, because he can be seen as a devil who's out to corrupt and steal Fred's soul (he sure is creepy and he doesn't go where he's not invited), or he can be seen as an outside manifestation, a symbol of dark forces and emotions that are driving Fred to kill, but will eventually make him pay, which is basically the same thing. He's tempting Fred to escape, at first, but he also wants him to take the responsibility for what he did. We see Fred in the end trying to escape his identity once again, thus remaining on the lost highway which can be seen as a personal hell.

Where did he invent the mechanic character from? Now, that's a tricky one. It could be random, but most likely it's not. Pete has a completely different lifestyle from Fred. He's a mechanic while Fred's a jazz saxophonist, he's young and Fred's middle aged, they belong in different social circles (that is until Fred's reality started creeping into Pete's). Pete's life appears to have been a simple life of a typical young man. This could be seen as Fred's longing for a totally different life and for completely becoming somebody else.

The questions I myself asked after I saw this film was - Does this Pete exist in a real world besides Fred's 'psychogenic fugue' state? Was he a real person and not just an invented identity for Fred? Did they switch identities? I still don't have the answers and probably never will. But I must say that the ambiguity makes this film even more powerful. That is especially evident in one short scene, where we see Pete running to the highway, upset, like something has happened, many voices can be heard and we see from the first person view that somebody is approaching him, fast, like in a car (maybe Fred). This scene is presented as Pete's memory on some event that his parents refer to as 'that night'. Maybe Pete also felt like wanting to crawl out of his skin (like many people at least once in a lifetime) and through some strange Jungian synchronicity, Fred wanted that, too. Taken on a literal level...bam!...they switched. It's just something to think about. Since Lynch is a very intuitive director, maybe he let his subconsciousness run a little wild with this one. I mean, sometimes our minds work in mysterious ways.

Brilliant explanation, I think. It seemed as though the characters were morphing from one to the other in the second half of the film, it's really complex and trippy and weird. But enjoyable. Thanks for the explanation, even though I'm still really confused. Maybe I will have to watch it again, but like I said I think it's pretty similar to Mulholland Drive in the set up.

You mentioned characters morphing in the second part of the film. Well, towards the end Fred's reality finally takes over. It happened after Pete made love to Alice. She told him that he can never have her. That's when Pete disappeared and Fred appeared, meaning he 'woke up'. Her words have ambiguous meaning - He can't have her because she's not real, or because he killed her (Renee), or because he never did have her (meaning his wife never loved him and was deceptive) and that's why he killed her. That's a rather cruel slap on the face of someone who wants to forget. Then Mystery Man tells him something like: "Her name is Renee. If she told you her name was Alice, she's lying. And your name? What the fuck is your name?" That's when Fred finally realizes who he is and what he's about to do. He kills Mr. Eddy/Dick Laurent and goes to tell himself that "Dick Laurent is dead", which we heard at the start of the film. Thus this story made a full circle.

That casts a new light on the first part of the film. Was that real, or was it another way for Fred to deceive himself and shift the responsibility for what he did onto Mystery Man. The first part of the film is very sinister and spooky and full of tension, something bad is going to happen or maybe it already happened (as we see on the tapes). I deliberately use past and future tense, because we're not really sure when in the film did he kill his wife, was it in the beginning or the end. But since the story is not linear but circular, and since Lynch plays a lot with time and non-time, it doesn't really matter. The consequences are the same and at least we know that when Fred's in jail, that's real and in present, as in now.