Toward the beginning of the film, much of the music and sound heard by the audience and characters are actually happening in the world of Breakfast at Tiffany's. The sound of a strumming guitar is actually coming from out the window, and the audience follows Paul to the window and looks out the window like he does to see Holly singing and playing out on the fire escape. Jazz music heard by Mr. Yunioshi is coming from two floors below at Holly's party. This use of music and sound almost feels counter to what the audience expects.
It is easy to expect, especially in a romance film, that all music is heard only by the audience and does not actually exist in the world of the characters. However, in Breakfast at Tiffany's the use of music that actually exists in the fictional world is almost surprising to the audience. When the guitar is first heard, it is almost assumed that the music just rests in the background of the scene. But as Paul walks to the window, clearly in search of the music, the audience has to change their perspective.
One major meaning that the music develops in this way, is to add character to Holly. Most of the music that the other character's hear and respond to revolves around her. This supports the idea in the viewer's mind as her character develops that she is a unique individual who not only surprises us but surprises the characters around her as well.
As the movie develops, music begins to take on a new role. Rather than adding to the development of Holly's character, sound turns to work on developing the audience. The music directs the audience to know how they should respond to each scene. The music sets the tone and the mood in a more effective way than dialogue would. For instance, when the train leaves with Doc, and Holly waves good-bye after a startling encounter between the two, the music is somber and melancholy. It is far more effective than having Holly say to Paul, "Despite the facade that I put on, I struggle to find my identity and this encounter has exposed that." The music just lets the audience feel as Holly does, rather than telling them how to interpret the mood of the scene.
This romance film has a musical theme that directs the audience's understanding to the movie's genre. A major turning point in the music occurs when Holly is sitting outside her window playing Moon River by Henry Mancini and as the song progresses strings (not from the world of the characters) begin to accompany her. While there is non-diegetic music earlier in the film, this is the moment where the two uses of music meet and then switch roles of importance on the screen. In a single moment, the film gives a nod to the diegetic music used thus far in the film, and allows the "mood music" to step in and take over. In this way, the transition from reality to fantastical romance, aided by romance, can be accepted by the audience. It is through this moment that the audience accepts the use of non-diegetic sound for the rest of the film.
The movie blends unlikely encounters, unlikely people, and unlikely romance through the use of music. The role of both diegetic and non-diegetic sound, and the transition between them, allow the audience to follow the romantic journey of Holly and Paul.