I was so impressed by this book that it's taken me awhile to work out what to say.... primarily, what fascinated me was the grace and effortlessness with which it moves from one setting to another: a large chunk is set in Kashmir, covering much of the last half of the 20th century; another large chunk in Europe (primarily France) during the Second World War; the last chunk in Los Angeles in the 1990s. Each of these settings and historical periods is richly detailed; a lesser author would have taken an entire book (at least!) to evoke just one of them. Rushdie, however, discusses the history of Alsace and the history of the India-Pakistan conflict with equal facility, making for a truly rewarding read. And the prose is beautiful.
Of course, this isn't just a book about setting: we follow the lives of four main characters, as well as a host of minor characters who add quite a bit of flavor to the stories. Unlike some other reviewers, I think Rushdie's female characters are depicted quite well; neither of the female main characters is Everywoman, but as a woman I found them realistic and compelling even when I couldn't relate to their decisions.
This is one of those books that begins near the end, then works its way backward in time before coming back around; I often find this irritating since I already know what's going to happen, but in Shalimar the Clown it works extremely well: even knowing (part of) the end, I was dying to know what happened in the middle.
Finally, as far as the politics of the whole thing... I was surprised when I came to this site after finishing the book and saw how many people view it as a book about terrorism. Hardly. Yes, the history of Kashmir in the last half-century includes terrorists, and so they appear; yes, the book comments on the causes of terrorism. But there is a lot more to it than that; with slight alterations, the book could have been written with only passing references to terrorism and kept the story largely the same, which should tell you it's not the big focus. If it might bother you, you should know that the Indian government is portrayed in an unfavorable light, while Rushdie's views on the US government come across as somewhat ambivalent. And that the atrocity count in some places is high, although this doesn't make the book depressing all the way through--some of my favorite scenes were the comic ones depicting pre-war village life in Kashmir.
Some have read this entire book as political commentary (with particular characters representing "east" and "west", "Hindu" and "Muslim", etc.), and since Rushdie is a literary author, I don't doubt he intended that. But for me it was mostly just a great story, and I thoroughly enjoyed it as such. Happy reading!