First, a warning: this post contains some spoilers, although I think I managed to avoid the most major ones.
I'm not entirely sure when in the Naruto timeline this movie takes place. Certainly much later than what I've seen of Naruto Shippuden, and I think a bit later than I've read in the manga. Naruto knows who both his parents are, several of the Akatsuki are dead, Sai is there, and Naruto has saved the village from Pain. Naruto demonstrated one ability that I haven't seen yet in the manga: he released Nine Tails' full form and rode on his back during battle.
At the beginning of the movie, Kakashi, Naruto, Sakura, and several others from the village fight the Akatsuki and are confused, because they know several of their opponents have previously been defeated. The fight ends fairly quickly, which is a relief for everyone, but also somewhat suspicious. That doesn't stop the parents of the various chunin from talking about recommending them for jonin-rank. Naruto is once again reminded that he has no parents who could do such a thing for him. After Iruka refuses to fill out a jonin application for him (because he isn't even a chunin yet – you'd think they'd have made him an honorary chunin by now) and Sakura yells at him for not siding with her after she has a fight with her parents, Naruto storms off.
All fights are forgotten, however, when Madara suddenly appears and tries out an experimental jutsu called Limited Tsukuyomi. When Sakura and Naruto come to, Madara is gone and no one even seems to know who he is. Not only that, but everyone in the village is the opposite of what they normally are: Hinata is aggressive, Shikamaru is dopey, Kakashi is gung-ho and overuses his sharingan, etc. There are story differences, as well. For example, Sakura is now the daughter of heroes – her parents, rather than Naruto's, were the ones that gave their lives for the village.
