It could be 3. But thats like asking if we are living a dream.. so assuming that we are living reality.. we assume the reality of his being an dream extractor and then having executed the job returning to his kids....the japanese guy kills him and his ownself to come out of the top layer of that dream.. thats indicated when he is shown touching his gun.Originally posted by: return_to_hades
But the totem. They never conclude if the totem topples over or spins infinitely aka we do not know if this is Cobb's reality or a dream.
The three possible conclusions I draw are
1) The architect (Ariadane) and the point man (Arthur) incepted Cobb and planted an idea to rid him of guilt.
2) Cobb went into limbo and is trapped in his dream
3) The entire film is a dream probably Cobb's or Mal's.