Shrek (U)

Watch out Mickey...here comes trouble

The future of animation is – for the next few weeks at least – green, bald and floppy-eared, with a Scottish accent. If only the technology could reach that far (and who's to say it won't, before long?) it would have a smell too – mossy, swampy, tinged with sweat and methane. Shrek, star of the film of that name, is the most engagingly repellent presence to emerge from Hollywood in ages: a crabby, reclusive ogre who bathes in mud, uses earwax for candles, and catches fish by farting.

Shrek's charisma is all the more remarkable in that – apart from his voice, donated by comedian Mike Myers – he is 100 per cent computer-generated. Perhaps that's not so strange: when flesh-and-blood ogres like Schwarzenegger and Willis look entirely plastic, and when Angelina Jolie can have herself pumped up and sheened into a computer-game heroine, then it's left to digital creations like Shrek to carry some organic screen presence.

Released last month in the US, Shrek, – the latest production of the DreamWorks studio – has already grossed $197m at the US box-office, and is already the most successful non-Disney animation feature ever. This will be good news for producer Jeffrey Katzenberg, who is also one third of DreamWorks' founding triumvirate along with Steven Spielberg and David Geffen. And it will be bad news for Disney, which had previously led the field in computer animation, with the hugely successful creations of John Lasseter's Pixar studio – the two Toy Story films and insect extravaganza A Bug's Life. In 1998, DreamWorks competed against Disney with its own bug animation Antz, but it is Shrek that has struck gold for the studio and its digital animation house PDI.

Industry observers have seen Shrek as the latest strike in a more personal battle. Katzenberg was formerly chairman at Disney, where he presided over animation hits such as Aladdin and The Lion King. Set in a fairy-tale world, Shrek takes numerous parodic swipes at characters and images associated with his former employer. The villainous Lord Farquaad presides over a repressively squeaky-clean kingdom that closely resembles Disneyland. Sleeping Beauty's magic mirror flashes up a TV dating show. Pithiest of all is a scene lampooning the twee wholesomeness of Disney's cartoon princesses when Shrek's Princess Fiona shares an early morning duet with a songbird.

Some have detected more direct jibes. The diminutive despot Farquaad rails at remarks about his size, and this has been read as a retort to Disney chief executive Michael Eisner, with whom Katzenberg had a bitter dispute; Eisner admitted to having called Katzenberg a "little midget".

However, such industry anecdotes are hardly Shrek's main selling point, and promoting the film in Cannes last month, Katzenberg conspicuously played the diplomat. "I don't think we're challenging Disney, which is one of the greatest storytelling enterprises on the planet," he said. "I don't think our successes or failures are dependent on each other. Shrek has a very subversive tone throughout – we're playful with many aspects of culture, some of which are Disney. But we take shots at The Matrix, Crouching Tiger Hidden Dragon, WWF wrestling. Everyone is fair game."

Shrek is certainly darker and slyer than Disney ever is – one routine has the Gingerbread Man tortured by dismemberment and immersion in milk. The macabre touches and media in-jokes give Shrek an adult appeal, as opposed to animation's traditional underage constituency, with the critical condescension that usually entails. Katzenberg complained in Cannes, "Nothing makes me feel worse than when someone refers to these films as 'cartoons' – I find that demeaning." Of course, promoting a film like Shrek as a prestige adult production helps maximise its box-office potential – after all, computer animation is a phenomenally expensive form of film-making.

Where Shrek really astonishes is as an aesthetic phenomenon – this is one of those films you have to see if you want to be up on the state of the art. But then, you could say that of all digital animation – each new film, from Toy Story on, has highlighted a rapidly evolving new technology. We may already be jaded when it comes to seeing digital effects in live-action cinema (Evolution, out this week, proves that dinosaurs are no longer a big deal). Entirely digital cinema, however, is something else again – partly because we can sense the buzz of factory-fresh innovation, partly because it gives us an uncanny sense of an entirely artificial 3D reality supplanting our own.

Disney and DreamWorks have in recent years been involved in a sort of digital space race, as Pixar and PDI attempt to outflank each other with new software. "The only difference," says Andrew Adamson, one of Shrek's two co-directors, "is that in the space race, people knew where they were going – in computer animation, we don't."

You can sense that there's something new on display in Shrek, even if you can't grasp the arcane significance of terms like "volumetric rendering". It used to be said that digitals could handle well-defined solids, but that organic materials were impossible to perfect. No longer – in Shrek, the foliage rustles convincingly in the breeze, and the fabrics are startlingly tactile, from Shrek's peasant hessian to Princess Fiona's sheened velvet dress. The facial features are more plausibly human than ever and another PDI secret weapon, the FLU (Fluid Animation System), does wonders with mud, milk and lava – you could happily watch Shrek purely as a rhapsody in gunk.

To an extent, such films are research-and-development platforms for the software, but, says Shrek's other director Vicky Jenson, you have to get the priorities right – especially bearing in mind that such animation requires thousands of work hours and masses of computing – or "rendering" – capacity. "We had a scene where Shrek was throwing mud at Fiona. It was very charming but the 'render time' was just incredible because of the particles of mud interacting with her hair and the donkey's fur and the velvet. It was like, 'You can have that, or you can have 2000 characters invade Shrek's swamp – what do you want?' Well, we need the swamp – that's the story – more than we need the mud."

In practical terms, the nature of digital animation means that nothing is left to chance – a single flick of a donkey's tail requires time, money and bytes. Even the wisecracking is planned with unusual rigour, the film's various writers collaborating with an entire story department of artists and story supervisors. Even more than in the standard Hollywood process, everything is programmed to create the illusion of the energetically impromptu.

You can't help wondering, then, who really controls the multiplicity of intentions and decisions. Jenson explains her and Adamson's directorial role as providing "a creative funnel – you need a couple of people focusing on the continuity of the tone." In Cannes, which bows down to the primacy of the auteur, the film was billed as "Shrek, de Andrew Adamson et Vicky Jenson." But Jeffrey Katzenberg's presence at the festival left many in no doubt who was Shrek's real auteur. Ted Elliott, one of the film's screenwriters and co-producers, compares Katzenberg's role to that of the old Hollywood moguls: "Jeffrey functions in animation like a Selznick or a Thalberg would."

Not that it finally matters who "made" Shrek. The film's appeal lies in the way that its vivid, perverse world seems to have an autonomous existence. It could have simply magicked itself into being, or have appeared by fiat of an invisible god hidden deep in the software (the theology of digital animation is yet to be written). Most important, Shrek's world is as entertaining and clever as it is miraculous, which is why DreamWorks seems to have won this round in the digital war (pundits predict Shrek may well outgross Toy Story 2, which made $246 million). But the race never stands still for long, and the stakes are constantly raised. The embattled Disney will strike back this year with Pixar's latest, Monsters Inc, while technonauts eagerly await Columbia's computer-game spin-off Final Fantasy – the first digital animation to feature entirely naturalistic humans (the eagerly-awaited new race of "synthespians"). Better enjoy the freshness of Shrek while we can, before even its hypermodernity starts looking like the stuff of medieval fairy taes.

Shrek (U) is out on Friday