...the majority of reviews I read indicated that the reviewers did not understand what the movie was about even after having seen the whole thing...and when I saw it, I totally agreed. The rest of this post will have Dogville spoilers, so if you haven't seen it and intend to and don't want it spoiled, please stop reading now.
So, the basic plot of the movie is that Kidman's character (Grace) shows up in this mountain town during the Great Depression; she's on the run from some gangsters. The townsfolk decide to let her stay for 2 weeks, and she sets out to prove herself useful by helping everyone. They resist at first, but come to appreciate her help, and all is well for a while.
At some point, though, things start to go bad. Wanted posters appear and the townsfolk use them as an excuse to demand more labor from Grace. She attempts to escape at one point but is thwarted, and after that is more literally enslaved, with a collar and chain connecting her to a bell (so she can be heard) and a giant wheel that she has to drag around. And she's raped by most of the men in the town. (This is a terrible plot summary, but hopefully you've already seen the movie and I'm just refreshing your memory.)
Eventually, her boyfriend in the town calls the number on the card one of the gangsters gave him in the very beginning, hoping that she'll be taken away because she represents a threat to his image of himself as a moral person. When the gangsters show up, we find out that the head gangster is her father. Grace and her dad have a long talk in the car. She starts out on the side of the townsfolk, despite how they've treated her, but after thinking on it some more, decides that the world would be better off without them, and has them all murdered (including their children) and the town burned down.
Now, this is what Roger Ebert (who gave the movie 2 stars out of 4) wrote:
In [director Lars von Trier's] town, which I fear works as a parable of America, the citizens are xenophobic, vindictive, jealous, suspicious and capable of rape and murder. His dislike of the United States (which he has never visited, since he is afraid of airplanes) is so palpable that it flies beyond criticism into the realm of derangement.and
What von Trier is determined to show is that Americans are not friendly, we are suspicious of outsiders, we cave in to authority, we are inherently violent, etc. All of these things are true, and all of these things are untrue. It's a big country, and it has a lot of different kinds of people. Without stepping too far out on a limb, however, I doubt that we have any villages where the helpless visitor would eventually be chained to a bed and raped by every man in town.You can also go see David Edelstein's review for Slate here.
Now I know nothing of von Trier, so for all I know this could have been his exact intention and maybe he really does hate Americans and think we're all assholes. But since I'm looking at the movie and not the director, I don't really care what his intention was; I feel free to judge the movie on its own terms.
Some review I read (which I can't easily locate now, years later) thought that the ending just showed the utter bleakness of human nature, as inevitable crime is inevitably followed by excessive retribution. And I didn't see it that way at all.
Grace offers herself up, Christlike, and she maintains that mien right through the conversation with her father. In that conversation, her father calls her arrogant for refusing to apply the same high standards to others that she does to herself. He calls that the ultimate arrogance. And she rejects this idea, but leaves the car to wander around the town.
The turning point in her thoughts (which the narrator helpfully illuminates for us), and the point that I found really thrilling, is when she shifts from the question "Wouldn't I do the same as them in their place?" to the question "If I acted as they have, would I have any defense for myself? Would I not deserve whatever came upon me?" (These are paraphrases.) It is after this realization that she orders the town destroyed and the occupants killed.
I don't, of course, condone the murder of whole families, whatever crimes the parents might have committed. And the ending is a bit too horrifying in execution to be satisfying, at least to me. But I actually do love the moral reasoning. It's not about whether you're really any better than others; there's an actual standard to which everyone should be held, whether you yourself meet it or not. (There's some Kant for you.) And I like the turning on its head of the Christ idea. It changes from "Forgive them, for they know not what they do" to "Ah shit, the world would just be better off without these assholes, and they deserve it." It's like Noah's flood without, well, Noah. (I guess the dog, the only member of the town who is spared, is Noah, but I don't want to take this analogy too far.)
Also, contrary to Ebert's assertion that hardly anyone will enjoy the movie once, and nobody twice, I did enjoy it thoroughly both times. I find it rather captivating.