Pan's Labyrinth

The movie opens with a fairy tale. In it, Princess Moanna, whose father is the king of the underworld, becomes curious about the world above. When she goes to the surface, she forgets about her life in the underworld and grows old and dies as a mortal. The king believes that her spirit will come back to the underworld someday.
The story cuts to post-Civil War Spain in 1944, after Francisco Franco has come into power. Ofelia (Baquero), a young girl who loves fairy tales, travels with her pregnant mother Carmen (Gil) to meet Captain Vidal (López), her new stepfather and father of Carmen's unborn child. Vidal, the son of a famed commander who died in Morocco, believes strongly in fascism and was assigned to root out any anti-fascist rebels.
Ofelia discovers a large insect resembling a stick insect which she believes to be a fairy. It follows her to the mill where Vidal is stationed and leads Ofelia into an ancient labyrinth nearby. Before Ofelia can enter, she is stopped by Mercedes (Verdú), one of Vidal's maids who is spying for the rebels. That night, the insect appears in Ofelia's bedroom, where it changes into a fairy and leads her through the labyrinth. There, she meets the faun (Doug Jones), who believes her to be Princess Moanna and gives her three tasks to complete before the full moon to ensure that her "essence is intact". Meanwhile, Vidal brutally kills two farmers suspected of being rebels before searching them properly. After looking in their bag it is clear that they were hunting rabbits as they had said and were not rebels.
Ofelia completes the first task of retrieving a key from the belly of a giant toad, but she becomes worried about her mother whose condition is worsening. The faun gives Ofelia a mandrake root, which instantly begins to cure her mother's illness.
Accompanied by three fairy guides, Ofelia then completes the second task of retrieving an ornate dagger from the lair of the Pale Man (Jones as well), a child-eating monster who sits silently in front of a large feast. Although she was gravely warned not to consume anything, she eats two grapes, awakening him. He eats two of the fairies and chases her, but she manages to escape. Infuriated at her disobedience, the faun refuses to give her the third task.
Meanwhile, Vidal becomes increasingly vicious, torturing a captured rebel and then killing the doctor who euthanized the tortured prisoner to stop his pain. Vidal catches Ofelia tending to the mandrake root, and Carmen throws it into the fireplace, where it then begins to scream. Instantly, she develops painful contractions and dies giving birth to a son. Vidal discovers that Mercedes is a spy, and he captures her and Ofelia as they attempt to escape. Ofelia is locked in her bedroom, and Mercedes is taken to be tortured; however, she frees herself, badly injures Vidal, and flees into the woods, where the rebels rescue her.
The faun returns to Ofelia and gives her one more chance to prove herself. He tells her to take her baby brother into the labyrinth. Ofelia steals the baby after sedating Vidal; although disoriented, Vidal continues to chase her through the labyrinth while the rebels attack the mill. The faun tells Ofelia that the portal to the underworld will open only with an innocent's blood, so he needs a drop of her brother's blood. Ofelia refuses to harm her brother and the faun disappears. Vidal finds her, takes the baby and shoots Ofelia.
When he leaves the labyrinth the rebels and Mercedes are waiting for him. Knowing that he will die, he calmly hands Mercedes the baby. He takes out his watch, ready to break it, and tells Mercedes to tell his son when he grows up what time his father died, reflecting his father's death. Mercedes refuses, telling him that his son will never even know his name. Pedro, one of the rebels and Mercedes' brother, draws his weapon and shoots Vidal in the right cheek, killing him.

As Mercedes enters the labyrinth and mourns over the dying girl, drops of Ofelia's blood spill onto the altar that is supposed to lead her into the underworld. Ofelia is reunited with the king and queen of the underworld. She learns that by shedding her own blood instead of the blood of an innocent, she has completed the final task and proven herself to be Princess Moanna.