The literal meaning of the word mononoke is "the spirit of a thing."
It has the connotation of an avenging spirit, and is sometimes translated as
"monster." However, inanimate objects such as a rock or a wheel could also
be mononoke. In the film "Mononoke Hime," the term applies to
the guardian spirits of the forest, which appear in the form of enormous "god
animals" and as small "tree spirits."
The word hime means "princess." One of the main characters of
the film -- San -- although a human, is referred to as the "Mononoke Hime" (the
"Princess of the Mononoke", or the "Princess Mononoke") since she was
raised by the guardian spirits of the forest, and acts like one.
The director Miyazaki's original title for this film was Ashitaka Sekki
("The Tale of Ashitaka"), after the name of the film's protagonist. The
title Mononoke Hime derives from an earlier proposal of Miyazaki (see the MH FAQ), but ultimately was
reused for the current film, presumably at the urging of Miyazaki's distributor,
Tokuma-san.
