It probably says something about my preferences regarding animation – an art form I love for its freedom, its unique way of presenting its worlds and, in its short film status at least, its leaning towards the sometimes wildly experimental – that when I attempted to draw up a list of my 100 favourite animated films, there wasn't a single work from Disney on it. Bits of Fantasia may well have made it if I was allowing bits, but I wasn't. Since I escaped childhood, Uncle Walt and his company's habit of giving insufferably cute human characteristics to animals, playing narratives out to a formula, and lacing the storytelling with increasingly horrible musical numbers has failed to engage me on anything other than a superficial level, and in recent years has completely lost me as a viewer. (The exception would be John Lassiter's equally formulaic but undeniably witty and energetic works, but I see these as Pixar films rather than Disney ones in the true sense, despite the Disney umbrella under which they were made and released – Pixar's recent split with Disney goes some way to confirming that view.) It also says as much about these preferences that there were four Studio Ghibli films in my top 25 – the wonderful Tonari no Totoro, the exhilarating Laputa: Castle in the Sky, the gut-wrenchingly emotional Grave of the Fireflies and, most recently, Spirited Away. These decisions were not taken lightly – save for Grave of the Fireflies, whose emotional effect on me was so overpowering that I had to really steel myself up for a second viewing, all of these films I have watched between ten and fifteen times so far. And I have yet to tire of a single magical second of any of them. I guess it's a little ironic, then, that it is Disney who have picked up the American distribution rights for all of Studio Ghibli's works, including its impressive back catalogue.

I came at Spirited Away with two distinct advantages – as someone who is fascinated by, and thus familiar with, all aspects of Japanese culture, including its animated films, and as an already confirmed fan of the work of Studio Ghibli, and especially Hayao Miyazaki. I say this is an advantage, but I am surrounded by friends, students and colleagues who have come at this film with little knowledge of the country or its distinctive animation and never seen a single frame of Miyazaki's work, and yet their reactions have been almost exclusively identical – they love it to bits. When I recently returned from Japan with an armful of Studio Ghibli merchandise, everyone was begging me to sell items to them, and on a film studies course a colleague of mine teaches, more students chose to write their auteur essays last year on Miyazaki than any other film-maker. In these days of Tarantino over-exposure and an obsession with off-the-peg cool over the actually worthwhile, I find that very encouraging. This unification of opinion is also extraordinary considering that Miyazaki tells very Japanese stories for a primarily Japanese audience. The fact that western viewers are required to work a little, and are apparently very willing to do so, suggests an appeal above and beyond the potentially parochial one in the storytelling and characters, a more universal understanding that springs from our own childhood experiences and dreams, and Miyazaki's desire to create a film that is "for everyone who is, was, or will be 10 years old."

Spirited Away opens on young, disgruntled Chihiro on the back seat of her parents' car. They are moving to a new district, dislocating Chihiro from her home and friends, and she is anything but happy about it. By chance, or perhaps (as we later discover) pre-destiny, Chihiro's father takes what he believes is a short cut, recklessly driving along a secluded country lane until forced to halt at the entrance to a dark tunnel. Curious at what they have discovered, he and Chihiro's mother decide to investigate, and Chihiro, under protest, eventually accompanies them. On reaching the other side they find what the father believes to be an abandoned amusement park, but on further investigation they find signs of life, principally in the shape of a restaurant loaded with food. Unable to resist and hungry from their journey, Chihiro's father and mother sit down to eat, while Chihiro, annoyed at the both their situation and her parents' refusal to listen to her demands, walks off to investigate. It is here that she encounters young Haku, who forcefully warns her away. She rushes back to her parents and finds them, having gorged themselves on the food, transformed into pigs. Clearly, she is not in Kansas any more.

From then on the story develops with an almost dream-like sense of wonder and reality disassociation. Night falls, and the previously derelict establishments of the town's main street start to come alive, the street and its buildings filling with ghostly figures. Chihiro flees, landing by the shore of a huge lake bearing an approaching, light-covered steamboat, from which more spirits disembark (in one of the many, many beautiful touches to be found throughout the film, the spirits emerge first as floating masks, their bodies materialising only as they reach the shore). It is here that Chihiro realises that with the gradual solidification of this new reality, her own existence appears to be fading and that her body is becoming increasingly transparent. It is the arrival of Haku on the scene, who has already recognised her for what she is, that brings protection in the shape of a food that will give Chihiro substance in a world where she does not belong.

Explanations are slow in coming, as our voyage of discovery parallels that of Chihiro. The town, it transpires, is a resort for the gods, a place for them to rest from their duties in what presumably Chihiro regards as the real world. Central to the town is a bath house spa, a common (and frankly excellent) location for extended relaxation in Japan, but here dedicated to providing rest and sustenance for visiting deities of all shapes and sizes. This provides Miyazaki and his collaborators with a golden opportunity to create a world of wondrous creatures within a recognisably earth-bound location. Imagine the Star Wars cantina sequence multiplied by fifty. By the time we reach this point, the film is already in a wonderland, and and the rest of the story plays at the same imaginative pitch, repeatedly evoking a dream-like world in which the fantastic seems to co-exist quite naturally with the everyday.

This richly inventive surface layering – every time I watch the bath-house scenes I seem to see something new – is reflected in the complex substructure and is evident even in the smallest moments. Take when Chihiro first enters the bath-house with Haku, a scene that is essentially little more than them trying to sneak in, being spotted, and running for it, which is exactly how most western animated films would have played it, but Miyazaki isn't going to leave it at that. Chihiro has been warned to hold her breath, as humans are detectable here by their exhalations, but in attempting to do so she is alarmed by an inquisitive toad, who springs to head-height and almost immediately realises what she is. About to raise the alarm, the toad is temporarily imprisoned in a globe that is magically created by Haku, who grabs Chihiro's hand and, rather than run, flies with her just inches from the ground, shooting almost under the feet of passing geishas, and deposits her by a door too small for most of the creatures in the building to pass through. Putting the imagination and breathless energy of this sequence aside for a second, it also works for story, character and subtext: we realise that humans are not just outsiders here, but are effectively banned and that discovery would carry serious consequences; we see Haku demonstrate something of his powers and show that although he looks human, he probably is not; we are introduced to the over-inquisitive toad, whose nosiness and greed will later trigger off an allegorical sub-story in the bath-house; we see recreated one of the most vivid of dream images, that of being able to fly horizontally just inches from the ground; we get a small moment for the adults as the geishas the two pass under giggle at the kimono-raising thrill of the experience; and the first hint is given that there are doors and passageways all over this building, designed for specific purposes and creatures, and that Haku has been here long enough to know every one of them. The thing is, this all happens in the space of just twenty-five seconds. And this level of invention and attention to detail runs throughout the two-hour-plus running time.

Many of the film's most magical moments seem to be simply about the imagination and technical excellence of their execution – undeniably some are (and that in itself is no bad thing), but more often than not they are about much more. At one point Haku, in the dragon form that we discover he is able to take, is being chased by hundreds of paper planes that are inflicting increasing levels of injury through thousands of paper cuts – this is an extraordinary idea in itself (it is also beautifully animated), but a small paper plane is also flat enough to slide through the gap between two closed screens, and light enough to hitch a ride unnoticed on Chihiro's back. When the plane metamorphoses into all-powerful bathhouse owner Yubaba's twin sister Zinaba, a thematic link is made to the moment when Chihiro's name, and thus her earthly identity, is lifted from her work contract by Yubaba, and we later discover that Haku was being chased because he stole Zinaba's seal, a device used to give authoritative identity to (paper) documents, the very substance of his attackers. And there are loads of sequences like this.

Other scenes are more obviously allegorical, with Chihiro's fortune-turning encounter with a 'stink god' – a wonderfully designed and staged scene in itself – reflecting Miyazaki's own environmental concerns, and elsewhere comments are made on greed, teamwork, independence, ambition, family and friendship, and a fair few other topics. Andrew Osmond, in his excellent Sight and Sound review, made a case for seeing the story as a socialist parable, a self-centred, middle class girl who finds humility, self-esteem and liberation through industrial toil. It is surely no coincidence that the name Yubaba gives to Chihiro after removing her true identity is Sen, the Japanese word for One Thousand. Chihiro has gone from being a person to a number, a worker whose identity is defined primarily by what she is required to do to earn her keep. That she rises above this, works for the system and eventually triumphs over it, marks her as a revolutionary and an outsider who may not immediately change the way things are run, but in her success will perhaps inspire others to do likewise.

Also running through the film are influences of the two main Japanese religions of Buddhism and Shintoism, wholly appropriate given the clientele of the bath house. The ten perfections of Buddhism include Generosity, Morality, Wisdom, Energy, Patience and Resolution, all of which Chihiro learns through her adventures, and a quick glance at the Ten Precepts of Shintoism finds, amongst others, 'Do not forget your obligations to ancestors', 'Do not forget forget the limitations of your own person' and 'Do not be sluggish in your work', teachings that Chihiro learns and develops during her time at the spa. One of the film's many strengths is that all of this sits comfortably but solidly beneath the surface, giving substance to the story and purpose to the adventure. Although vividly memorable scenes abound, few seem staged just for fun of doing so, generally contributing in some way to the advancement of the narrative or the characters, notably Chihiro herself.

This is essentially Chihiro's story, and in that respect she makes for a seemingly unlikely but delightfully effective heroine. She learns to bury the initial bewilderment and terror at what is happening to her, at first to survive, then to advance herself, her ultimate goal being to free her parents and regain her identity. The friendship she develops with Haku is crucial to this, and again kicks against the traditional, for though Haku is the old hand here, it is ultimately Chihiro who fulfils the hero's role, and it is she who frees Haku from the spell cast on him by Yubaba. The involvement of the spiritual Kaonashi, or No-Face, is initially more mysterious. During his time at the bath-house he feeds off of everyone's worst traits, becoming fat on their greed, an increasingly destructive transformation that explodes when Chihiro, already a changed girl, shows no interest in the temptation (and possible damnation) he represents and sacrifices a food that was destined to re-transform her parents in order to rescue this essentially lost soul. The torrent of vomiting that this provokes, especially the projectile gunge assault on Yubaba, is the film's only real wandering into the area of grotesque.

But in the end what makes Spirited Away so special is that it's an absolute joy to watch, and its quality as a film entertainment can be measured in its fabulous attention to detail, the loving care with which it has been executed and the beguiling nature of its characters and storytelling. Miyazaki draws here from a variety of sources, ranging from childhood experiences and parental observation to folk tales and the even works of Lewis Carol (also very evident in Tonari no Totoro). Individual sequences and moments are a delight, and need no understanding of subtextual motivation to be thrilled by: Chihiro's hilarious encounter with the work-shy soot-balls; her initially over-cautious but eventually high-speed descent of an insanely long staircase; the delightful antics of Yubaba's baby and winged companion once Zinaba has turned them into a hamster and a tiny, flea-like bird (a lot of this happens on the edge of frame or in the background and is only caught on subsequent viewings); the three grunting heads, presumably victims of an earlier Yubaba spell, who get a chance to run riot with candy after their latest transformation; the post rainfall railway whose lines lie just below the surface of the water (a very strong childhood dream image); the glove-wearing, squeaky lamp-post that greets the travelers and guides them to Zinaba's house.... I could go on until my laptop's battery ran out.

Adding a dreamy finishing touch is yet another glorious score by Miyazaki (and Takeshi Kitano) regular Joe Hisaishi. His music brings and extra layer of excitement, mystery and even a sense of loss and wonder, without ever slipping into mawkishness or sentimentality. Special mention should also go to the hauntingly beautiful end credits song by Yumi Kimura, a welcome alternative to those damned Randy Newman tunes that bookend Pixar's otherwise fine films.

That Spirited Away became the most commercially successful film in Japanese history and the most successful Japanese animation to hit foreign shores doesn't surprise me in the least, and the only unexpected elements of the Oscar win are that a) any of the voting members had actually seen a non-Disney animation, and b) that anything this great could actually win such a tacky gong. As with every film, in the end it's all a matter of subjectivity – anyone who watched the shambolic mess that was the BBC's first European Cinema Awards will remember actor Robert Carlyle arguing against the inclusion of both Spirited Away and Sylvain Chomet's Les Triplettes de Belleville on the basis that no animated feature could seriously be regarded as a great film. I beg to differ, as did the other judges – Les Triplettes de Belleville won it. Despite the undeniable brilliance of Chomet's film, for my money Spirited Away is even greater, a truly gorgeous creation that comes wondrously close to cinematic perfection.

Though it may seem that 2D animated films, with their sometimes reduced colour range and more emphasised shape edges, should automatically look good on DVD, other region 1 Miyazaki releases have come in for some criticism for excessive edge enhancement. Thankfully, there is none of that on display here – sharpness, contrast and the largely pastel colour palette are just right, and artefacts are rarely visible, despite the large areas of similar colour common to cell animation. Both the US region 1 disc reviewed here and its UK region 2 equivalent actually have the edge on the Japanese disc, which displays a reddish hue throughout that was certainly not evident on the cinema print.

The optional English subtitles are very clear, and though sometimes simplified from the Japanese dialogue and occasionally Americanised (the use of the term 'honey', for example), on the whole they offer a most reasonable translation. A second subtitle track offering English for the hearing impaired is of similar technical quality.

Though this is Japanese film with a Japanese language track, Disney have created an alternative English dub in which the japanese voices are replaced by those of American actors for the US market, sometimes gratingly so. Both the Japanese original and English language redub are included in virtually identical 5.1 mixes (the English language track seems to have a fraction more oomph in places). It's all a matter of choice which track you choose, but as far as I am concerned there is only one option – if a film was made in Japan with a Japanese language track then that is how it should play. The English language dub sticks to the essentials of the Japanese original, but puffs up the dialogue and sometimes 'adapts' it for the US audience. This track also sounds more 'voiced' than the Japanese original – there seems to have been little attempt to mix the voice track so that it sounds 'on location', so to speak. Even the French Dolby 2.0 dub sounds more part of the soundtrack than the English language one.

Both the Japanese and English 5.1 tracks are clear, well-mixed and make reasonable, though not showy use of the soundstage. Although front-weighted, some sound effects (usually atmospherics such as rain, wind or river sounds) make use of the rear speakers, and Joe Hisaishi's wonderful score comes at you from every angle. Occasionally, such as a bird flapping in the tunnel entrance to the alternate world, a sound effect will leap from the rear speakers and catch you out. The French Dolby 2.0 track is serviceable, but lacks the fullness and crystal clarity of the other two tracks.

Even before you can get to the main menu there are two trailers. The up side is that they are for other Ghibli releases Castle in the Sky and Kiki's Delivery Service. The down side is that they are American trailers, voiced by one of those Trailer Voice Guys who says every line in a mock heroic voice and is given to reading out what is on screen. "Above the clouds" says the graphic at the start of the Castle trailer, which immediately prompts Trailer Voice Guy to say "Above the clouds!" And so on. These trailers are also for the dubbed versions, and since both of these films have been messed with (unnecessary extra dialogue and music) in this incarnation, true Ghibli fans would be advised to skip them to avoid offence.

As with the other Disney releases of Ghibli films, the movie itself is introduced by Pixar director John Lassiter, whose enthusiasm for the film is very genuine, but I would have preferred a separate interview with him rather than have him pop up and tell me I am "lucky" to be about to watch the film. I know – I've seen it fourteen times! Just run the film already!

The Art of Spirited Away sounds exciting enough, but it was produced by Disney and is actually a rather sickly EPK designed to promote the dubbed version of the film. From the moment Jason Marsden, who voices Haku in the redub and makes for a most irritating host, introduces himself and points his finger to emphasise what he is saying, you pretty much know what you're in for. Bits are interesting, and Miyazaki himself is interviewed (though dubbed rather than subtitled), and John Lassiter waxes lyrical over Miyazaki's skill, which I am not going to argue with. It's interesting to hear producer Toshio Suzuki explain that after numerous offers Ghibli finally agreed to the Disney deal because they said they would not change the films in any way. Oh really? Check out the re-scored music in the dubbed Castle in the Sky and the extra cat dialogue and different songs in Kiki's Delivery Service. A lot of time is spent watching the American cast redub a perfectly fine Japanese soundtrack, which only served to remind me how irritating the American track is.

Sneak Peeks has trailers for a number of recent Disney works, plus the aforementioned Ghibli acquisitions Castle in the Sky and Kiki's Delivery Service. Aspect ratios vary from cropped 4:3 to 16:9, but none are anamorphic.

The rest of the extras are on disc 2, and kick off with Behind the Microphone, which covers similar ground to the section in The Art of Spirited Away, which looked at the process of re-voicing the film. Once again this is irritating stuff for purists, but is at least short at only 5 minutes 41 seconds. I did find it amusing in this day an age to hear Kirk Wise, director of the English Translation, explain that when the actors were redubbing the film they could see it play on a monitor in front of them "in full colour." Wow, now that's technology!

The Storyboard-to-Scene Comparison is a standard feature on Ghibli releases, but the ten minutes offered here do not compare well with the Japanese release or Buena Vista's own UK region 2 disc, which has this feature for the whole film (all Japanese Ghibli releases I have seen feature English subtitles as standard). Many may find this of little interest, but for artists and animators this is a compelling extra, and having the whole film enables you to study chosen scenes in this sort of detail, rather than just the one selected. Having just spent two weeks laboriously storyboarding a shoot myself, I take my hat off to anyone who can do this for a living, but the storyboards here have a particular interest because Miyazaki draws all of them himself.

The Nippon TV Special is a whole different story, and almost justifies the disc's special edition status on its own. Running at 42 minutes, this is a fascinating look behind the scenes at Studio Ghibli, filmed for Japanese television and almost unique on this DVD in that it has not been dubbed, but subtitled. Despite the studio's international success and the large team it now employs, there is still a sense of a small cottage industry creating purely for the art and the fun of it. The programme is driven by voice-over (typical of Japanese TV documentaries, as is the almost constant music score), and the structure is a little ramshackle at times, but much of the content is priceless for Ghibli fans, showing production meetings, artwork in progress, the process adapting the real world to the fantasy world of the film (a dog being fed a pill is videotaped at a local veterinary hospital, then his movements are studied by the animators by re-running the tape and are adapted into an animated sequence involving Haku in dragon form), and even meal breaks – far from a trip to the studio canteen, spaghetti or noodles are cooked up in the animation offices by one of the animation team (they take turns – even Miyazaki does his share) and eaten on the job. Shot on 4:3 NTSC video, it is sometimes a little lacking in definition and colour, but the content more than makes up for this.

Finally there are the Original Japanese Trailers, which are presented 16:9 anamorphic with – and this is pleasing to see – optional English subtitles. We are used to seeing trailers for movies included as extras, but get this – there are close to twenty-nine minutes' worth here. Just about every trailer released in Japan, from teasers to full-blown previews, are collected, though cannot be selected individually – they run one after the other as a commentary-free featurette. Definitely do not watch this before seeing the film.

Spirited Away is a wondrous creation from one of modern cinema's true masters, and at the time of writing is the highest rated animated film – at number 42 – on the Internet Movie Database top 250. It's international success has not just helped bring Miyazaki's distinctive style, and through DVD his back-catalogue of work, to a wider audience, it has shown up the severe shortcomings of most recent western animated features, and vividly illustrated how comparatively shabby Disney's animated output has become.

As a special edition this 2-disc set is a mixed bag – the storyboard-to-scene comparison is a severely cut-down version of the one on the Japanese disc, the two featurettes are heavily biased towards the English language version and you have to fiddle around with the menus to activate the original Japanese track and English subtitles. But there is still enough to bring deep joy to the Miyazakai fans out there – the film looks and sounds fine, the Nippon TV special is a behind-the-scenes treat and the collection of trailers is, to put it mildly, exhaustive. If you're in the UK, then go for the region 2 disc – the storyboard-to-screen comparison runs for the whole film, and you get a trailer for the next studio Ghibli production, Neko no onegaeshi (The Cat Returns). Whatever version you go for, though, this is a must-own film for anyone, as Miyazaki intended, who is, was, or will be 10 years old.