Overall, I think we’ve been told the truth by the end of the film:

1: Lenny and his wife were attacked; he suffers a breakdown, and so kills his wife with insulin. It’s after this that he concocts the story of how his wife ‘really’ died, using repetition to hard-wire a new memory.

2: At some point, he turns this into a quest for revenge on his wife’s killer.

3: Then he hooks up with Teddy (who investigated the original attack, and had some bits of info). Teddy maybe/maybe not helps him track down the real John G., and they kill him.

4: Lenny–who must cling ot his fabricated situation or be confronted by the truth that it was he who killed his wife, continues to surrender his own memories. Teddy is both frustrated by this, and comes to realize that Lenny can be useful, a weapon against drug-dealing scumbags.

5: Lenny and Teddy investigate Jimmy; during this time, Jimmy hears the Sammy Jenkins story, which he also relays to his girlfriend, Natalie.

6: Natalie knows Jimmy is going off to meet Teddy and the ‘memory guy’. When he never returns (because Lenny kills him), she figures Lenny did it because she sees him in Jimmy’s car. As she learns more about the situation, she then decides to use him, first to get rid of Dodd (who wants money that Jimmy owed her), and then get revenge on Teddy himself. Since this dovetailed with Lenny’s own intentions (briefly conceived when he figured out the truth after killing Jimmy), things became pretty unstoppable.

The oddest bit in the movie is the way even those around him–the ones using Lenny’s ailment for their own ends–don’t fully believe in it or understand it. Hence, Natalie’s insistance that he will remember her after sleeping with her, and the way she gets put out that he doesn’t.

Salon did a good piece dissecting Memento when it came out in 2001:
http://archive.salon.com/ent/movies/feature/2001/06/28/memento_analysis/

Teddy uses him for money - During the scene where Jimmy is killed, Teddy mentions that he’s been using Lenny to extort money from various John G.’s

The Hotel clerk uses him for more revenue - He rents Lenny two rooms.

Natalie uses Lenny to get rid of Dodd - By killing Jimmy, Lenny set Dodd on a path to try to get his money back (she says Jimmy went to meet someone named Teddy, who we learn later has been extorting money from drug dealers named John G. in order to keep Lenny away).

Finally, Lenny uses himself to get revenge on the man who was using him to kill others and profit from it - Teddy.

Final verdict - Teddy’s death: Justice
Whether or not others he met deserve the same fate? Unanswered.

I personally think that Teddy was indeed lying at the end, that Lenny’s wife was indeed murdered by some John G. they killed a year before. The insulin story seems to be a lie by the way he changes the story right after saying it. I think Natalie, Teddy, Lenny and Jimmie (all -y-ish names, hrm) all knew each other before the events of the film (save Natalie and Lenny to each other, as they meet for the first time in the film). Jimmie has heard the Sammy story before, and is trying to use it to buy his life from Lenny? That’s what I thought.

Regardless, Teddy’s death is no tragedy, but nor is it justice for the murder of Lenny’s wife. It’s the way to break the cycle of meaningless revenge on the innocent and to allow Lenny to move on with his life.

Ben

I’ve always assumed that Teddy’s entire involvement with Lenny was to use him as an assassin to take out a series of criminal “John G’s” who had escaped prosecution by some means. Maybe a chronological viewing will shake that assumption: I always thought Teddy was sleazy, but he might be considerably more sinister than I realized.