Almost every movie lives and dies in its genre; animation doubly so. Princess Mononoke is one of the very few animated films (out of perhaps five or six total in history) that stands first and foremost as a film, not an animated product. What we see is too fantastic to be "real," but the story is told with such conviction and strength that we accept it entirely on its own terms.
Such is the hallmark of any excellent movie, actually. Mononoke stands out for being both an animated production and the product of Hayao Miyazaki's animation house, Studio Ghibli. Miyazaki is probably responsible, more than almost anyone else in the history of Japanese animation, for productions that not only stood out in their field but ennobled the rest of it by mere association. My Neighbor Totoro, Nausicaa of the Valley of the Wind, Whisper of the Heart, Grave of the Fireflies, Kiki's Delivery Service and Porco Rosso are all both beautiful and thoughtful.
Mononoke stands out from the rest of Miyazaki's works by dint of being possibly the best of them all — as well as the most matter-of-factly violent. The underpinning of the story is man's often brutal relationship to nature, "red in tooth and claw." There is little sentimentality about the fact that people die, often pointlessly. There is also something else that many films of any variety do not have — a level of moral ambiguity about its characters that forces us to see what happens from multiple angles. There is no stereotyped villain in a black cloak; the most "evil" character we see is in fact extremely sensible and pragmatic in her motives, and the "good" characters are sometimes deeply misguided. They are, in short, human.
The film takes place in a world which could be Japan's own feudal past, but is not intended to be a specific historical period. The life of a peaceful village is disrupted when a boar-like monster with writhing, wormlike flesh (one of the most astonishing monsters in any movie) comes tearing out of the forest. The village's young prince, Ashitaka, puts down the beast but is also wounded in the process. No one in the village can do anything about the wound, which appears to be cursed. Ashitaka is also puzzled by the presence of a wound in the creature as well, left behind by a shapeless chunk of metal (a bullet, obviously, but guns are unknown in this land). His theory is that the wound also caused the creature to turn violent. By finding who injured it in the first place, he may also find a cure for his own injury, which is getting progressively worse.
His journeys take him to the fortress-city of the Lady Eboshi, who manufactures guns with which mankind drives back nature and settles the land. Lady Eboshi may be "anti-nature," but she's also pro-humanity. Her refinery/village is a haven to the crippled, the lepers and the outcasts, who work hard and are accepted as productive members of a community. Much as Ashitaka would like to hate them, he can't — although ironically enough, they are suspicious and fearful of his infected arm. The arm itself starts to take on a kind of mind of its own, and even while it's suppurating and growing more diseased, it's also gaining a superhuman level of power — as demonstrated when Ashitaka decapitates an attacker with an arrow.
The fortress is also being besieged by San, a "wild child" who was nursed by the forest's wolf-gods. She has allied with the other nature gods and despises humanity, especially the variety of humanity embodied in Lady Eboshi and her clan. Ashitaka stops her and tries to put himself on both of their sides, but no one wants Ashitaka for a diplomat — they want Ashitaka for his strength. Allegories to modern dilemmas are easy enough to draw; I've heard at least one discussion of the movie as a parable for ecoterrorism and anti-globalist resistance. But the merits of the movie go beyond mere analogies; the story stands on its own without any modern-day referential crutches.
Miyazaki's style is of course a product of the Japanese anime market, but he is able to break free from a great many of the conventions of same without shirking the power that they can convey. Most of the characters are depicted with a strong degree of detail and realism, but also with a cleanliness of line that is reminiscent of the best storybook illustrators. (I was actually reminded of Herge's Tintin.) When Ashitaka's festering wound takes on a life of its own, it's funny at first (and the animators know it), but it gains a level of horror that is subtly delineated.
Even the obvious romantic cliches are avoided: San and Ashitaka eventually grow fond of each other, but they are all too aware that there is a gulf between them that even love can probably never bridge successfully. And when all is said and done, the few characters that we would think most likely to have been slaughtered, thanks to decades of cheapjack Hollywood eye-for-and-eye revenge morality, they are alive but humbled.
I am often asked by adults who want to introduce their children to anime where to start. Mononoke is a good bet for teens and older; it's too violent for very young children, and a lot of the moral gray areas of the movie may be a bit over their heads. It's also long at two and a half hours, and a few sections in the middle drag a bit. But it's not one of those prepackaged morality lessons disguised as entertainment: this movie is awake and alive, and it shows in every scene.