The movie Salo is an adaption of the infamous novel The 120 Days of Sodom by the even more infamous Marquis de Sade, transferred from pre-Revolutionary France to Facsist Italy. It is a mostly faithful, though condensed adaptation of what is perhaps the canonical Book which could never be made into a movie.
There are two interpretations of the movie, which really hinge on the two common interpretations of the works of the Marquis de Sade himself: either as an unstinting indictment of the morally corrosive effects of absolute power on the wielders of power, or simply as an irredeemable catalogue of artistically unjustifiable evil. I lean to the former, but you could make a pretty strong argument for the latter one.
When I saw Salo, it was with a group of some of the most jaded, unshockable self-proclaimed degenerates you could ever hope to find. People who watched all of the Faces of Death videos in a row, just to prove they could stick it out. They affected a complete lack of shock at everything in the movie - somebody even brought out chocolate brownies during the Circle of Shit. That, to my mind, is the thing which really frightens me about Salo, and a vindication of the point it tries to make - that basically decent people (as represented by the soldiers in the film, I think) are capable of accepting even the most abject evil imaginable, if only they grow used to it.
As a side note, the reason Salo was Pasolini's last movie was that not long after he finished production, he was stabbed and beaten to death by a male prostitute. Life imitates art. Or something. | 
