The narrative thrust of this novel surrounds vignettes of American diplomats and military personnel in the fictional nation of Sarkhan following the warfare of the Pacific theatre of WWII, and it can be seen as related to the Vietnam War by outlining the kinds of failures that damaged the Asian nations' perception of Americans.
The feeling among the Sarkhan people is that Americans outside the context of American society act ostentatiously and presume authority and severity not typical of the Americans back home. In other words, Americans seem to assume that they're better than the Sarkhan people.
In the vignettes, there are some meaningful stories as well, such as the Ugly American himself, a village-dweller who taught farming techniques to the natives, as well as little domestic tricks like canning preserves. Several of the characters are modeled on real people.
Ironically, the title referred to a good man, but the term Ugly American has been adopted to mean the poorly mannered, pretentious type of person that the native Sarkhans had to suffer.