It is a fictional movie, based on a fictional book that was based on a real life 16 year old kid's disappearance and eventual suicide.
Real short version: Child prodigy suffers depression and is a closeted homosexual, his confusion and pressures from his family drove him to leave his college and make several suicide attempts. An investigator was hired to find him, in his investigation he learned about the D&D game the kid played. He formed a hypothesis that we are all familiar with: live action game, character dies, kid tries to kill self. He abandoned the theory, but after he finally located the missing boy, he was asked to keep the truth secret. Wanting to do right by the boy, he returned to his abandoned idea and called it truth. Several years later, after the kids final, successful suicide attempt, the investigator wrote a book telling the real story of the case, but the media already had it’s ‘truth’ and the damage was already (unintentionally) done.
You can read a (longer) short version at Wikipedia:
http://en.wikipedia.org/wiki/James_Dallas_Egbert_III#Egbert_incident
or a much longer, more detailed account here:
http://ptgptb.org/0006/egbert.html
It is a sad and tragic story. I think anyone who role plays should be familiar with it, as it is indeed the basis of much of the confusion and hate that D&D is still subject to, even today.
The movie? Heck, I like it. Own a copy. The acting is ‘early eighties bad’, but it’s not horrible. It’s only Tom Hanks’ second film but his talent still shows through.