What is kitsch as Kundera uses the term in The Unbearable Lightness of Being? I thought it refers to inferior imitation art, but Kundera seems to use it...

Concerning
"kitsch" in Kundera's , you are correct that it is, literally,
inferior art.  It may be inferior for different reasons, two of which are sentimentality and
vulgarity. 

A third is more specific to the novel.  Kitsch in the novel is
inferior because it is propaganda.  The art of "social ," as it is called, is the
literal kitsch of the novel.  It's sole purpose is to promote the totalitarian state.  It
is propaganda, not art.  Art should reveal elements of human existence and reveal the complexity
of existence--it should raise questions.  The art of social realism claims to have all the
answers.

Figuratively, though, Kundera uses the term, kitsch, metaphorically
to mean that which the totalitarian state does to control its people.  Any regime such as the
communist one in the novel seeks complete agreement on all matters that relate to the power and
authority of the state.  The state uses such events as the May Day celebrations to maintain
control over its people.  The state is involved in reductionism.  It simplistically reduces
issues, events, whatever, to a specific interpretation that it sanctions.

Kundera writes that the totalitarian state is devoid of .  The state takes itself very
seriously:  It cannot admit a difference between appearance and reality or that something didn't
turn out the way it was supposed to.   Kitsch is the low quality propoganda that takes many
forms and is used to maintain control of the people.