For me, Pan's Labyrinth didn't live up to the hype. It's still a good movie though: vividly envisioned and surprisingly deep (emotionally and thematically). The mood was pitch perfect throughout, with nothing feeling different when switching from the real world to the fantasy realm. The interconnectedness between the two environments is perhaps a bit hidden if you don't discuss the movie afterwards, and can be easily missed. The acting on the part of the little girl was absolutely incredible (I am thinking specifically of the scene where she is begging her brother not to hurt her mother when he is born).The transitions killed me; as Erik said, it was like Star Wars all over again with the ludicrous wipes in every conceivable direction and variety every five seconds. I felt the violence was gratuitous and probably didn't add that much to the mood (although I obviously can't be certain). There were even some inconsistencies in the violence; sometimes nothing happened when someone got shot in the head (no bullet holes or blood coming out of their face), while other times it was senselessly grotesque. Regardless, it's a thoroughly entertaining movie that can generate healthy discussion afterwards; just be wary of how graphic the violence in the film is.
IMDb link: http://imdb.com/title/tt0457430/