*This has never been stated explicitly by the films creators and is just my opinion.

The first half of the film is Fred Mason's subjective memory of past events. Perhaps this is what he tells the police under interrogation. In reality, he murdered his wife because he suspected she had been cheating on him, although we never learn whether or not Fred's suspicions are true.

The second half of the film is a deranged dream/fantasy that takes place entirely in Fred's brain. In this fantasy, he re-invents himself as a young stud and restructures the events of his life in order to justify/erase his crimes. Eventually, his own guilt manifests which turns fantasy into nightmare. In reality, he is on death row awaiting execution by electric chair.

This last scene shows us what is playing out in Fred's brain in the final moments of his life.

-At 0:45, the hood is placed over his head.
-At 1:08 he is electrocuted.
-At 1:20 he is dead.

Then David Bowie sings a song called 'Deranged'.

I'd love to hear other ideas/theories if you've got 'em. I'm also happy to attempt to answer any LH questions you might have. I love this film.