Bayonetta kills the in-game equivalent of God, and then some fake credits roll, with pieces of God suspended in space while Bayo watches from atop a crumbling rock, mourning the loss of her childhood friend Jeanne (who awoke her so that she could defeat said God), implying she is going to let herself perish, now that she's saved the world. Then Jeanne's heel stomps away the credits and they destroy the rocks so they don't destroy Earth.
Part of me wishes they stuck with this ending, because I guess I just like tragic, emotional endings (also because I need an extended version of this track in my life), but I'm glad everyone was alive by the end and the writer has a third game planned for release at some point! Easily one of my favourite video games of all time.