Pan's Labyrinth is a multi-layered story that is more than the sum of its parts.
There are three story threads running through this movie. The first is about Ofelia, a young girl who travels with her very pregnant (and very sick) mother to live with her evil step-father out in the country. After arriving she meets some magical forest creatures who tell her that she is the long lost princess to a magical kingdom. The second story is that of the evil step-father, a brutal military captain fighting off a group of revolutionaries. Last is the story of Mercedes, the house maid who is working in the country house while secretly feeding information to the rebels.
With all these stories put together the movie becomes one third demented Jim Henson production and two thirds gritty war movie.
The Ofelia story is the heart of the film. It focuses on a series of tasks set forth by a Faun to find entrance into the kingdom. Consequently, she goes on all these tasks alone, so the viewer is left to decide if these events are real or part of her imagination. The rest of the film is delegated into the "real world" of the very brutal Spanish Civil War. Now, when I say brutal, I mean it. At one point, after a major shoot out with the rebels, the military goes to all the dead and shoot them again in the head to make sure they are all properly deceased. What got to me the most about the violence is that it is so unexpected.
Almost the entire movie takes place in the real world which is violent and deadly and scary in its own right. Clearly the violence is used for shock value to contrast from the fantasy elements in the Ofelia storyline. It's this theme that carries the film. While Ofelia is running around doing all these magical tasks, she asks the adults about Fauns and Fairies to which they reply they used to believe in them when they were children, but not any more. Guillermo del Toro tells a thought-provoking tale about the lose of childhood innocence.
Admittedly there is nothing intrinsically wrong with the movie, but it is so lost in the fairy tale theme that the characters are more caricatures than actual people. While the movie is following a theme, for all intents and purposes it skates melodrama pretty closely.
Certainly this is not a movie for everyone and definitely not for children. There is significant message for adults to appreciate here. Sadly, after that there is little more that needs to be said about the film.