Lacan begins the essay by declaring it to be "situated halfway" between speech and writing. By doing so, he foreshadows both the essay's notorious opacity and its theme: the relationship between speech and language and the place of the subject in relation to both.
The essay's first section, 'The Meaning of the Letter', introduces the concept of "the letter", which Lacan describes as "the material medium that concrete discourse borrows from language" (Écrits, p. 495). In his commentary on the essay, the Lacanian psychoanalyst Bruce Fink argues that "the letter" is best thought of as the differential element which separates two words, noting that:
"In a hundred years, 'drizzle' might be pronounced 'dritszel', but that will be of no importance as long as the place occupied by the consonant in the middle of the word is filled by something that allows us to continue to differentiate the word from other similar words in the English language, such as 'dribble'." (Fink, Lacan To The Letter, p. 78)
Lacan indicates that the letter, when thought of as a "material medium" in this way, cannot be directly manipulated so as to alter language or intersubjective meaning. In a footnote to the essay, he praises Stalin for rejecting the idea (promoted by some communist philosophers) of creating a unique, specifically communist language by noting that "language is not a superstructure".
Lacan uses his concept of the letter to distance himself from the Jungian approach to symbols and the unconscious. Whereas Jung believes that there is a collective unconscious which works with symbolic archetypes, Lacan insists that we must read the productions of the unconscious à la lettre - in other words, literally to the letter (or, more specifically, the concept of the letter which Lacan's essay seeks to introduce).
In Freud's theory of dreams, the individual's unconscious takes advantage of the weakened ego during sleep in order to produce thoughts which have been censored during the individual's wakened life. Using Lacan's concept of the letter, we should be able to see how, in Fink's example, the unconscious cleverly produces the censored thought associated with the word "algorithm". (Of course, this does not actually tell us why this particular hypothetical analysand has consciously censored a thought associated with the word "algorithm".)
Because Lacan's use of the concept "the letter" requires a concept of materiality different from anything previously found in linguistics, Lacan argues that the signifier and signified are separated by a bar, which he calls "the phallus". The signifiers can slide over the top of this bar, with the signified elements beneath. This means that there is never an easy correlation between signifier and signified and, as a result, all language and communication is actually produced by the failure to fully communicate.
The asymmetrical relationship between signifier and signified is further complicated by the fact that the bar between them (in other words, the phallus) cannot itself be signified. For this reason, there is a distinct difference between the phallus as an image of the male penis, and the Lacanian phallus. Theorists such as Slavoj Žižek have frequently pointed out this fact in order to defend Lacan against his feminist critics.
Lacan aligns desire with metonymy and the slide of signifiers above the bar. This produces a situation in which desire is never satisfied because it can never "cross the bar" to become fully signified and, therefore, satisfied. For this reason, one's desires can never be identified in a statement along the lines of: 'I desire x, y and z'. Instead, desire is slippery and metonymical. Lacanian theorists often note that capitalist consumerism is predicated upon this fact about desire: because desire is never satisfied and yet, always sliding from one signifier to the other, the capitalist subject finds him or herself making an endless series of purchases in order to satisfy their desire.
The way out of this metonymical chain of unsatisfied desire, for Lacan, is a "crossing of the bar" by a signifier. Lacan aligns this operation with metaphor rather than metonymy. When a signifier crosses the bar, from above it to under it, it becomes a signified. But this leaves a space or gap above the bar which, according to Lacan, is the subject. In Lacanian psychoanalysis, the subject only appears fleetingly, on those rare occasions when a signifier crosses the bar, leaving an empty space above it.