“Time flies like an arrow” is often cited to illustrate problems with computer aided language processing. It is also an example of how ambiguous English can be.
But is it really so ambiguous? How would it be understood by a native speaker?
The sentence 'Time flies like an arrow', with or without context, is very unambiguous to the native speaker. 'Time' is the subject, it metaphorically 'flies' as fast and without stopping 'like an arrow.
But the phrase is often accompanied, either before or after, by
Fruit flies like a banana.
which is word-for-word parallel, but not exactly by part of speech. The parallelism is both strange and funny on its own (it makes banana seem to fly, as a fruit, in the manner of the arrow), but also reflects on the pair 'time flies' (which are presumably a strange kind of fly).
Time flies like an arrow
Time (Subject) flies (verb) like an arrow (prepositional phrase modifying 'flies')
Fruit flies like a banana
Fruit flies (subject) like (verb) a banana (object).
But with respect to the other sentence one could say
Fruit (subject) flies (verb) like a banana (prepositional phrase).
It is this sentence that is the most ambiguous. not the 'time flies' sentence.
The latter parsing is not at all expected and so would not be understood naturally by a native speaker.
Time flies like an arrow. is an old idiom that means time passes quickly, subjectively. Hurry up with your life because it will end before you notice.
Now the pun and the problem:
Time flies like an arrow. Fruit flies like a banana.
No, there are no insects named "time flies". But there are very common insects called Fruit flies. The tiny insects appear almost magically on any less-than-fresh fruit, and definitely speed up the process of rotting. Bananas, which go bad exceptionally quickly are one of their favorite foods.
(One interesting note: They are also a favorite target of study of genetics, with a 4-day life cycle and a set of very distinct features.)
The confusion in language processing comes because software might not catch the dual meaning of like in the full sentence (Time flies like an arrow. Fruit flies like a banana.).
I am not a native speaker, but I assume most people would understand it unambiguously: something abstract, such as time, or a non-rational entity, like a fruit, can not "like" something.
There are many possible - some rather contrived - interpretations of the full sentence, but most speakers would not have difficulties understanding it.
Is it really so ambiguous?
There are many possible interpretations of the sentence
Time flies like an arrow.
Here are some of the more obvious ones:
How would it be understood by a native speaker?
Time flies like an arrow would be understood by native speakers to mean "time passes quickly, as an arrow flying through the air goes quickly".
This particular meaning is due (in my opinion) to these reasons:
At the heart of English grammar is the relationship of subject + verb (or SV). I suspect that native English speakers are primed to recognise and process that relationship until something else occurs which forces another understanding. In 'Time flies like an arrow', 'Time' can easily be S and 'flies' can easily be V. In 'Fruit flies like a banana', 'Fruit' starts off being S and 'flies' V, but then things go awry, forcing a re-evaluation: 'Fruit' becomes a noun modifier, 'Fruit flies' a subject NP and 'like' the verb. Now, 'Fruit flies' is just as much a subject as 'Time' is, but it takes (very, very slightly) more processing time to recognise it as such, so native speakers first prefer 'Fruit' as the subject, and not 'Fruit flies'.