Tricky question. Depends on how you choose to read the movie ... SCI FI EXPLANATION - Because the real Frank (who you see near the end get shot in the eye) dies in the "Tangent Universe" (meaning he dies after the point where the jet engine lands on Donnies house) his future self somehow is able to reappear as a ghost like figure and guide Donnie toward his destiny - ie. sending the jet engine back and therefore closing the rip in time and making things right again. This is as defined by the sci fi rules set out in the "Philosophy of Time Travel" (kind of a compendium to the move - pages are displayed on screen in the directors cut). SPIRITUAL EXPLANATION - He represents a divine intervention. Be it God, an angel, an alien? ... who is also trying to guide Donnie. The being has chosen the form of Frank so that when the time comes Donnie will recognise that Frank is the one he has to shoot. LOGICAL EXPLANATION - He is a figment of Donnies imagination, because he is crazy as batshit. There's probably other ways to look at it too.
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