Grant (Stephen McHattie), Sydney (Lisa Houle) and Dr. Mendez (Hrant Alianak) discover that people aren't getting infected by contact, they are getting infected by certain words. When people think about and understand a certain word, they become infected, and must seek out and destroy the source of the sound, or they will die violently. They also discover that the cure is the exact opposite - if someone is repeating a word over and over, that is the infected word for that person. If they are confused about the meaning of that word, then their brains cannot understand the word, and they are cured.
This information, however, comes too late. The French-Canadian police react to the "rioting" by the infected people violently, and begin bombing Pontypool in an effort to kill all the infected people, since they do not know there is a cure. Since Grant and Sydney are shouting nonsensical phrases over the radio in an effort to confuse, and thus cure, the population, the police also assume they are infected, too. The movie ends with a countdown coming from the police bombers, and the screen goes black. It is assumed they bombed the rest of Pontypool, killing Grant and Sydney with it.
After the credits, there is another radio broadcast by a different station. They announce that the rioting in Pontypool has been stopped. One of the radio personalities says the word "Pontypool" and then begins repeating it over and over, showing that, maybe, the infection wasn't stopped in time.