Warning: Wikipedia contains spoilers.
The movie is an adaptation of the first part of a series of novels by Frank Herbert, with elements from the later parts. Lynch originally wanted to create a much longer movie; his first draft was five hours. As the production ran out of money and the producers wanted a format better suited for cinemas, much of the original footage was cut and replaced by narration.
Lynch uses a number of elements from his earlier movies, for example the figure of the Space Guild Navigator, who has a strong resemblance to the alien baby in Lynch's first movie, Eraserhead, which also appeared in The Elephant Man. Another element is the use of low, humming sounds which create unease in spectators when used over a longer period of time.
In financial terms, the movie was a disaster, but has a number of dedicated fans.
The film's chief flaw is its almost total lack of exposition; the audience is presented with a barrage of admittedly fascinating sounds and images, but unless they have read the book few of those sounds and images will make the slightest bit of sense to them.
Dune was recently remade as a three part miniseries for release on cable and rental video/DVD.