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Erroneous interpretations of the words in the Second Amendment occur from both sides of the debate. The meaning of the words "militia", "well regulated", "the people" , "to keep and bear", and "arms" are discussed.

The Second Amendment:
A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.
A Militia
The word "militia" has several meanings. It can be a body of citizens (no longer exclusively male) enrolled for military service where full time duty is required only in emergencies. The term also refers to the eligible pool of citizens callable into military service. The federal government can use the militia for the following purposes as stated in Article I, Section 8 of the Constitution:
To provide for calling forth the militia to execute the laws of the union, suppress insurrections and repel invasions;
Is today's National Guard the militia? It is a part of the well regulated militia, and as mentioned in GunCite's, The Original Intent and Purpose of the Second Amendment, it was not the intent of the framers to restrict the right to keep and bear arms to a militia let alone a well regulated one.
(Once a member of the National Guard is ordered into active military service of the United States, that member is no longer under the command of a State Guard unit. See the Supreme Court case Perpich v. Department of Defense, 496 U.S. 334 (1990) for a brief but good explanation of the evolution of the National Guard statutes.)
For a definition of today's militia as defined in the United States Code, click here.
A militia is always subject to federal, state, or local government control. A "private" militia or army not under government control could be considered illegal and in rebellion, and as a result subject to harsh punishment. (See Macnutt, Karen L., Militias, Women and Guns Magazine, March, 1995.)
People often reverse the relationship between the right to keep and bear arms and the militia. We have a militia because we have the right to keep and bear arms, not because we are members of a militia. Even if the National Guard were to render the militia obsolete, the right to keep and bear arms for self-defense is not in any way invalidated.
A brief summary of early U.S. militia history.
Well Regulated
Of all the words in the Second Amendment, it is the word "regulated" that probably causes the most confusion. The Random House College Dictionary (1980) gives four definitions for the word "regulate", which were all in use during the Colonial period (Oxford English Dictionary, 2nd Edition, 1989):
1) To control or direct by a rule, principle, method, etc.
2) To adjust to some standard or requirement as for amount, degree, etc.
3) To adjust so as to ensure accuracy of operation.
4) To put in good order.
The first definition, to control by law in this case, was already provided for in the Constitution. It would have been unnecessary to repeat the need for that kind of regulation. For reference here is the passage from Article I, Section 8 of the Constitution, granting the federal government the power to regulate the militia:
To provide for organizing, arming, and disciplining, the militia, and for governing such part of them as may be employed in the service of the United States, reserving to the states respectively, the appointment of the officers, and the authority of training the militia according to the discipline prescribed by Congress;
Some in their enthusiasm to belong to a well regulated militia have attempted to explain well regulated by using the definition "adjust so as to ensure accuracy". A regulated rifle is one that is sighted-in. However well regulated modifies militia, not arms. This definition is clearly inappropriate.
That leaves us with "to adjust to some standard..." or "to put in good order." Let's let Alexander Hamilton explain what is meant by well regulated in Federalist Paper No. 29:
The project of disciplining all the militia of the United States is as futile as it would be injurious if it were capable of being carried into execution. A tolerable expertness in military movements is a business that requires time and practice. It is not a day, nor a week nor even a month, that will suffice for the attainment of it. To oblige the great body of the yeomanry and of the other classes of the citizens to be under arms for the purpose of going through military exercises and evolutions, as often as might be necessary to acquire the degree of perfection which would entitle them to the character of a well regulated militia, would be a real grievance to the people and a serious public inconvenience and loss.
--- See The Federalist Papers, No. 29.
"To put in good order" is the correct interpretation of well regulated, signifying a well disciplined, trained and functioning militia.
Here is a quote from the Journals of the Continental Congress, 1774-1789 which also conveys the meaning of well regulated:
Resolved , That this appointment be conferred on experienced and vigilant general officers, who are acquainted with whatever relates to the general economy, manoeuvres and discipline of a well regulated army.
--- Saturday, December 13, 1777.
Finally, note the Oxford English Dictionary, 2nd Edition, (1989) defining regulated in 1690 to have meant "properly disciplined" when describing soldiers:
[obsolete sense]
b. Of troops: Properly disciplined. Obs. rare-1.
1690 Lond. Gaz. No. 2568/3 We hear likewise that the French are in a great Allarm in Dauphine and Bresse, not having at present 1500 Men of regulated Troops on that side.
The People
This paragraph shouldn't be necessary. That one must explain why the "people" in the Second Amendment means individuals and not the state, or the people "collectively" is a sad commentary on the intellectual honesty of our day. Where are the quotes from the founders indicating that the right to keep and bear arms is solely a right belonging to the state? None have yet to be brought forth. The first nine amendments were meant to preserve individual rights. The people are mentioned throughout the Bill of Rights. Were the Founding Fathers so careless in constructing a legal document that they would use the word "people" when they meant the "state"? We think not. Evidence of an individual right to keep and bear arms is presented throughout the Second Amendment section of GunCite, and will not be repeated here.
To Keep and Bear
To "keep" simply meant the people were allowed to keep their own arms for self-defense or for militia use. "To bear arms" is thought by some to apply only in a military context. However, even at the time of the founders this wasn't true. For example in 1776, Pennsylvania's Declaration of Rights stated: "That the people have a right to bear arms in defense of themselves and the State."
In Colonial times "arms" meant weapons that could be carried. This included knives, swords, rifles and pistols. Dictionaries of the time had a separate definition for "ordinance" (as it was spelled then) meaning cannon. Any hand held, non-ordnance type weapons, are theoretically constitutionally protected. Obviously nuclear weapons, tanks, rockets, fighter planes, and submarines are not.