On the surface, XBLA game ilomilo is a cute, nonsensical game about 2 little things named Ilo (the red one) and Milo (the blue one). In order to finish a level, the player must control both Ilo and Milo, eventually making the two meet, finishing the level. Each set of levels is themed around some seemingly random backdrop (a park, a lake, paper/letters, and space/nightime). Along the way, there are a bunch of little collectibles that fill up a meter that, when filled, rewards the player with a scrap piece of photo and a letter (called memories).
In game, the first set of levels are based on a park. We are initially told that Ilo and Milo simply like meeting in the park; it's their daily routine. We are also told that everyday the park rearranges itself and they have to find each other all over again. We are also told that maybe Ilo and Milo just don't remember it the same each time. When the player has collected enough photos, they are told a simple story via letters of two people, Ilona and Milton, who are simply reminiscing about the Summers they used to spend in the park. The final letter (written by Milton) alludes to his impending death, stating "I don't know how many Summers I have left."
The lake levels are set up when we are told that Ilo and Milo get sad when they have to leave each other everyday, and they fall into lake made from their own tears. They eventually make their way out, though. The story we are told this time via letters is of a lake they Ilona and Milton used to visit. They both seem especially fond of this time spent together. Milton states that he still has his rowboat on the lake, and says that they should meet there once again. We are left with a letter from Milton stating his disappointment that Ilona never showed up. We are also left with a picture of a man, with only his cane for company, staring at his favorite lake.
The next set of levels is themed around paper and letters. We are introduced to the concept when Ilo and Milo can't find each other, and decide they should leave maps and letters everywhere so that one could easily find the other. However, their desire to see each other again is so great that they never stay in one place, and only confuse each other even more by leaving so many different letters. The story we are told via letters this time involves Milton writing to Ilona, wondering if she even still lives at the house he's sending the letters to. He receives a letter back from a Doctor who says that she doesn't. Milton assumedly stops sending letters for a time, when he receives a letter from Ilona that asks why Milton stopped writing to her. She says she hates being locked up "like a bird in a cage," and wishes she could escape.
The final set of levels are themed around nightime/space. Ilo and Milo decide to stay together and try to find where the sun goes at night, so that it wouldn't ever have to be night. Therefore they could stay together forever, never having to go home (since that's what has to happen at night). In the final set of correspondence between Ilona and Milton, we are told of the plan they have to meet at the night train, next to the ferris wheel they enjoyed as children. The final letter isn't a letter at all. Instead, it's a Missing Persons Report of one Ilona Zevon and Milton Foley.
ilomilo is about 2 old people who are slowly loosing their minds, but remember life together when they were younger. Milton, sensing his impending death, wishes to be with his childhood sweetheart Ilona, one last time. He tells Ilona that he wishes to meet with her at the lake. Ilona doesn't show up. Distraught, Milton send Ilona more letters asking why she didn't show up, and if she even lives in the house he's sending the letters to. He receives a letter back from a Dr. Jacob Griy that states that Ilona no longer lives there. Some time afterward, Milton also receives a letter from Ilona, now an old maid who lives with a doctor (they don't share last names, so one must assume that she is housebound with a live-in doctor) stating that she wishes she could be free from the house she is forced to stay at. Finally, Milton and Ilona both decide to run away together, catching a night train in the city. Ultimately, we don't know if they ever made it to that train.
ilomilo's levels represent the surreal nature of memories. Although Ilona and Milton may remember things a little differently each time, we can be sure that they are remembering something real. The more they remember each fantastical moment, the more they remember the present state of things; their impeding deaths due to old age. It's also worth mentioning that the characters, Ilo and Milo, are NEVER described using gender. I believe this is a way to convey the pure and innocent relationship they had as children.
There are many ways to interpret the ending. I choose to interpret it as such; I think both Ilona (being the more senile of the two, evidenced by her need for a live in doctor) wandered around aimlessly, becoming lost and probably dying somewhere in the woods near her house. I think Milton (being the more fragile of the two, as evidenced by his own admission that he doesn't have much time left) never made it to the train to begin with. I think he died, alone in some hotel room in the city. Having no living relatives, he is only noticed missing by his landlord, who files the missing persons report when Milton fails to pay his rent.
I choose to interpret it this way simply because Ilo and Milo DO meet each other on a train. The ideal outcome of meeting each other on that train was all Ilona and Milton could think of in their final days. Therefore, they remembered the experience of meeting on the train, as if it actually happened. The final level, set in the starry night sky and ending with Ilo and Milo meeting on a fantastical dream train with wings that ascends into the heavens, represents their ultimate fate. They both died remembering the meeting they never had. They only truly reunite in the afterlife, together forever in eternity, allowed to travel to places they never could in life.
I have no clue what Sebastian represents.
All I know is that he's the hunter in "The Hunter and the Fox."