Mal's story is the tragic compromise of Cobb as well. As Ariadne best puts it, his guilt defines her, gives her power. His guilt, that in saving her, he destroyed her. This is the true danger in Inception, the fact that an idea can grow and define, or consume and destroy.
The story of her demise is simple enough, but what is most confusing and interesting is her return. Mal's first quote is "If I jump, would I survive?" Her very first words to Cobb immediately fill him back up with guilt. In these few words, we remember Mal has died from the fall from the window, and Cobb cannot rid this from his mind. But Mal is just a projection, but this grows incredibly difficult to remember. Everything Mal says, Cobb knows.
The scene switches (dream logic) to a quiet room. Mal comments on the art around the building, that it is "Arthur's taste." Does she know Arthur? No, however, Cobb does. (Actually, Arthur does mention she was "lovely" in reality, implying they have met.) Therefore she does. Almost as if the conflicted piece of Cobb is speaking to his guilty, angry side. She goes on to further instill guilt into him, asking "Do the children miss me?" The second part of Cobb's guilt sits in coldly, that she is not real, but the children she has left behind are.
Mal goes on to sabotage the mission, disappearing from her chair while Cobb attempts to rappel down the side of the castle. He goes back to work immediately, pulling a silenced pistol from nowhere, breaking into Saito's safe to recover his engineering plans. Saito arrives almost immediately, along with Mal, who has Arthur as her hostage. As she only a projection, she knows that Arthur is the dreamer and the dream relies on him, thus she injures him (pain is in the mind) and forces his "death". The dream collapses, and Cobb's plan fails terribly, as Saito has known about the Extraction all along.
It is surprising at first a projection, designed for defense, would go to such lengths to sabotage its owner. Then one must consider Mal is powered by guilt, the fact that Cobb would still be with his children had he never experimented with dreaming.
As mentioned previously, the totem is the strongest connection to the old Mal, and Cobb also sees memories of Mal in his other dreams (in Mombasa, he remembers their suicide in limbo, then in reality, he remembers her suicide from the window, he is interrupted by Saito at this point.) We also see hints of Mal (when Cobb enters the snow level, he remembers the hotel suicide, since he is in a hotel. Also the wine glass breaking when he enters the room.) Mal is always apparent in his subconscious.
Mal, if not obvious, translates to "bad" in Spanish, and Mal certainly commits some contradictory acts in the movie. She becomes more and more deadly as Cobb reaches his goal of returning to reality, and away from her. She firsts cuts Cobb off from the action by appearing as a freight train in the rainy city. She interferes less as Cobb focuses on his children in the hotel, but her final appearance is most haunting. The audience gasps as Mal drops from the ceiling in the snow fortress, and calmly shoots Fischer. Her immediate interference in the Inception job forces Cobb to kill her. He later arrives over her body, shaking his head and commenting "I couldn't kill her." Well sure he did! Actually, he didn't. He didn't truly release her from his mind, thus she took Fischer's mind down into limbo. Had he shot her before her interference, the job may have ended differently.
(Eames adds a chilling comment, "Well it's not me that doesn't get to go back to my family.")
It's here Ariadne saves the day with her logic and resolve, and pure instinct. She suggests they go down deeper and recover Fischer's mind, then perform the Inception. In traditional limbo fashion, two enter limbo rather than one.
Cobb eventually reaches Mal, who, with cold irony, is waiting in their house, just in front of the door. Almost as if she stands between him and his children. Its here we almost believe for a second this is the true Mal, not simply a projection. That is because Cobb believes this too, for a moment. She takes a moment with him, asking Ariadne if she believes COBB is real, chased around the globe by faceless executives, projections persecuting the dreamer. (Ironic that Mal IS Cobb's greatest projection-persecuter.) However, Cobb almost appears lost in her fantasies, until he refuses to look at his "children". He tries to explain he needs to see them up above, reminding him once again of the job at stake.
Ariadne locates Fischer on the porch, yelling it's time to go. Cobb appears almost lost, until he reveals he cannot stay with her because she doesn't exist. This is the final climax for Cobb, a lasting, miniature Inception upon itself, detaching himself at last from Mal. He has at last chose his children, his reality, over her.
The projection, swollen with guilt, goes down with a fight, stabbing Cobb viciously with a kitchen knife. Ariadne somehow acquires Cobb's pistol (dream logic... but what was Cobb going to do with the gun anyway?) and puts Mal out with a bullet. Her last remark is that she is "improvising". She boots Fischer off the roof, then tells Cobb to find Saito before she jumps herself.
Mal, like a punished child, cries and makes her last stab of guilt at Cobb: he said they would grow old together. Cobb at last finds peace in the fact that they did, they had their time... 50 years of it. He lets her go and bows her head as the projection Mal dies.
Thus is the end of the projection, and in truth, the end of the totem's significance to anyone with half a brain. Now that she is gone, Cobb no longer is concerned with her haunting him, and eventually finds his way to Saito, explaining the story to him, and thus the story ends.
