In this case, the plot is one that at first glance challenges authority, but ultimately challenges reality. The film begins with one poor fellow being told a tale of murder and intrigue by another fellow sitting on the same bench. As the story unfolds, we are introduced to Dr. Caligari and his fortune-telling somnambulist Cesare. The future he predicts, though, is quite dire... One of the protagonists is to die, and sure enough, he is murdered that very night! Slowly it is revealed that the murderer is Cesare himself, shambling about the midnight city under the command of Dr. Caligari. Taken to an insane asylum, we find out that Caligari is, in fact, the very head of that asylum, and soon he is committed to one of his own cells. So ends the lurid tale of the man on the bench. But just when it is all over, he makes a commotion... There is Caligari, the murderer! But he is still the head of the asylum, and the man on the bench is the inmate! What has happened? Was the tale just a madman's ravings, or something more...?
As originally written, the film did not have this framing sequence in the asylum: Caligari is committed as an inmate of his own madhouse, and that is that. The authorities, however, felt that such a plot was not proper (after all, authority should never be challenged), and had the new false ending filmed. This satisfied them, but it is hard to see how they could not have noticed the good doctor's glance at the fade out... This new end is still ambiguous enough to leave audiences guessing for 80 years.
Most immediately noticeable in Dr. Caligari are the sets and scenery. For the most part, these were designed by the famous German minimalist and expressionist art school Bauhaus. Many of these set-pieces were actually 2-dimensional frameworks of wood and paper, with the shadows painted onto them. Fitting quite well into this world is Conrad Veidt as Cesare. Clad in a black body-stocking and made-up in black and white face paint, he is quite literally the forefather of the Gothic subculture. In fact, the musical group Bauhaus took many conventions of German expressionism into their own artwork, and often used images directly from the film in question.
It is also worth noting an "almost-was" with this film. Fritz Lang, who gained immortality through his science fiction masterpiece Metropolis, was all set to direct The Cabinet of Dr. Caligari when he opted instead to direct the spy/adventure serial The Spiders. It would have been interesting to see how Lang would have dealt with the material, but one doesn't particularly miss his presence in this film.
The complete Cabinet of Dr. Caligari.