Yes, the island does package holidays, at their cheapest and most cheerful. But it also does lonely hills, says Simon Calder, and almond groves
Even though I was the one sipping on a cold beer one hot evening last week, they were the lucky travellers. My entertainment was the sight of the sinking sun picking out the low-lying islets in the bay, then flaring the High Town with scarlet; theirs was an inflight rerun of An Audience with Ken Dodd. But they were lucky because, any minute now, their aircraft would roar over my table at this beachside restaurant with the warm tapas and cool fridge. The shattered peace of an Ibizan evening signalled that they would be ejected into the dying light of a Mediterranean island, while I would board their plane and go home.

Ibiza does hardly anything except holidays, yet it does them so well that coming home is a wrench. It is the third-largest of the Balearic islands, the same size as the Isle of Wight, and has much else in common. It has picked up the Isle of Wight's former mantle (surrendered 25 summers ago) as the music capital of Europe. The night turns in to one long rave at the resort of San Antonio. Here, the eponymous and tiny 14th-century church at the town's heart is battered by techno music, while each club in the "West End" tries to score more highly than its rivals in terms of bpm and dB - beats-per-minute and decibels. (On the subject of scoring, the dancing is often chemically enhanced; it inspired one of Lennie Henry's best gags. "Those little white pills are amazing," says the black comedian. "They make white men believe they can dance.")

So far, you may be be unconvinced that an Ecstasy-fuelled Balearic frenzy is for you. But last week most of the visitors were enjoying a much gentler form of ecstasy. Ibiza closes down from the end of October until May, and the island's first stirring from its winter weariness is an ideal time to visit.

My package tour billeted me in a self-catering apartment in Portinatx, a lot easier to enjoy than it is to pronounce (the ending, in my mouth at least, disintegrates into a "natch"). Having signed up for the absolute bottom-of-the-range cheap holiday, I was not expecting a place with a startling view across a rugged bay, the strident green of the spring shoots clashing gloriously with the implausible brochure-blue of the sea.

You could not fail to win. In one direction, the charmingly ramshackle resort: three beaches, with sand as warm and soft as a pillow, a string of cheap and cheerful restaurants, and a scattering of bars (Delboy's, and the British Bar) where the only white mind-altering substance was a sweet fizzing Snowball and the music was more Shadows than Shamen.

Striding off in the opposite direction was a footpath into the hills. Besides holidays, Ibiza does hills, and it does them superlatively. The island is shaped like a bowl, and the rim that protects the flat centre is a jagged crown of rocks, strewn with gnarled trees and stubborn shrubs. Everyone else has chosen the beach option, so you have the interior to yourself. The solitude appears to be going on for ever, but eventually runs out at a tidy little village.

The place turns out to be San Juan, and some of the population is strangely familiar. The last time I saw those flowing (and now greying) locks and beards was at the 1970 Isle of Wight pop festival. British hippies have taken to Ibiza like insects to Afghan jackets, and the locals have taken to the hippies, too. The biggest retail event on the island is the hippie market, where a fine array of trinkets is set out for the package tourists to snap up.

Every constituency is represented in democratic Ibiza: the hippies, the hyper-organised and hyperactive Club 18-30s, the extensive gay community (including some slightly comical naked fishermen) and us - the lumpen, 100-quid-for-a-week tourist proletariat. And the island is all the richer for it.

Like most places in Ibiza, San Juan has two other names. The first, and more correct, is Sant Joan, the style in the Ibiceno dialect - a derivative of Catalan. The second is San Joo-ann, as rendered by visitors who rent a car to explore the island. With signposting poor, they pick up hitch- hikers merely to decipher the correct way to San Jose or wherever. But the sensible visitor uses the cheap and reliable bus service that starts simultaneously with the tourist season.

From the window of a bus, streaked with winter grime, Ibiza looks like a junior version of Spain. Everything is delightfully small-scale. The bus rumbles along narrow lanes, demarcated by ancient drystone walls. Agriculture appears to be more of an art than an industry, with orange and almond groves selected for visual appeal rather than earning potential. Now and again you glimpse the real cash crop: the beaches where tourists nurture their tans.

Every bus on the island ends up at Ibiza Town. The island's largest settlement lacks even the clout to be a provincial capital (that role falls to Palma de Mallorca, 100 miles across the Med). Stripped of authority and formality, it modestly goes about the business of being a small Spanish town.

Ibiza shrugs off some distastefully modern surroundings and concentrates on its beautiful and atmospheric heart. Ornate balconies facilitate high-level gossip, while the serious business of life is conducted at street level and oiled by chocolate y churros, cerveza y tapas - the great cornerstones of Spanish snacking. Any nation that insists upon its elevenses being deep-fried and dipped into thick, sweet hot chocolate, and demands that evenings commence with a sip of beer and a plate of savouries, has got soul.

Suddenly the street rises sharply ahead, and Ibiza reveals its piece de resistance: the fortress walls built to resist all the raiders seeking to capitalise upon the island's strategic importance. The townscape mutates into a jumble of cottages cowering within the ramparts, painted as dazzlingly white as the eyes of the grubby children who scurry among them. The summit is a grandstand to survey the workings of the island: ferries darting back and forth to the neighbouring island of Formentera; noisy snakes of screeching traffic (high revs and low power are the characteristics of the cars and motorbikes); distant clouds casting shadows on nearby beaches, pausing just long enough to worry the sun-worshippers; and the airport landing strip, where 600,000 of us will touch down this summer.

I wandered down to the nearest beach, Playa d'en Bossa, and picked my table at Los Parasoles restaurant. A more serene way to sample the dusk is hard to imagine, at least in theory. My right arm did all the work, lifting alternate portions of icy beer and hot chorizo to my lips. My left shoulder merely supported the sinking sun, which finally and triumphantly inflamed the tallest turret of rock. But the screaming jet brought me back to reality: Ibiza may be the most fun within two hours of Gatwick, but the downside is that home is only 120 minutes away.

Simon Calder paid pounds 113 for a one-week package through Skytours. From today, Lunn Poly (01203 225888) is offering pounds 50 off brochure prices on Thomson holidays - if you spend pounds 28 on travel insurance.

Further information: Spanish tourist office, 57 St James's Street, London SW1A 1LD (0171-499 0901).