Woolf's narrative technique in Mrs. Dalloway is stream-of-consciousness but a different form than, say, James Joyce. In Mrs. Dalloway, she is thinking a lot and the reader is privy to her constant stream of thoughts. (But it's not written in the first person narrative.) It feels very self-conscious when you read it; because the things written down on the page are what most people think--inside their heads--however they would never say out loud. This is her narrative style and it shows in Mrs. Dalloway how aware she was of her limited role in society and in her way of seeing herself in an almost objective way. Mrs. Dalloway was a character unto herself. She was herself and , at the same time, she was a character that she could observe.
In Mrs. Dalloway, Woolf employs a third-person omniscient narrator. The narrator is privy to Mrs. Dalloway's private thoughts, such as in the following opening scene. Mrs. Dalloway is on her way to buy flowers in London for a party she is holding later that night:
For Heaven only knows why one loves it so, how one sees it so, making it up, building it round one, tumbling it, creating it every moment afresh; but the veriest frumps, the most dejected of miseries sitting on doorsteps (drink their downfall) do the same; can't be dealt with, she felt positive, by Acts of Parliament for that very reason: they love life.
The narration presents her stream-of-consciousness thoughts that are provoked by what Mrs. Dalloway sees or hears around her. In the passage above, she has just heard the bells of Westminster and is moved to think about how everyone loves life and how she is connected to other people through hearing the bells.
The narration also presents the innermost thoughts of other characters in the novel. For example, when Peter Walsh, Mrs. Dalloway's former boyfriend, meets her years later, he thinks:
She's grown older, he thought, sitting down. I shan't tell her anything about it, he thought, for she's grown older. She's looking at me, he thought, a sudden embarrassment coming over him, though he had kissed her hands.
The narration presents the thoughts of different characters, even the smallest thought, as they go through one day in London. The result is a novel that presents everyday experiences as people truly live them; people in the novel are provoked to think thoughts both important and inconsequential by experiencing the world around them each day.