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In an early interview given by the filmmakers, it was mentioned that the film was shot with distortions in the aspect ratio, as if what we are seeing is really Lester's memories – possibly in his post-mortem state. The distortion drifts from subtle to exaggerated depending on the mood of the scene. The only time you see the people in proper aspect ratio is when they're seen in video playback.
– eddieVroom 2009-02-01 14:53