The young man on stage is not doing too well, so he smashes a glass to the ground, picks up the shards and tears them across his stomach. "You wanted blood, Edinburgh: you've got it," he shouts as he runs off. The MC comes out with a brush, nonchalantly sweeps up the pieces and introduces the next act. It's Johnny Vegas and Sean Hughes singing the theme song from The A-Team. An equilibrium of sorts is restored.

Outside, the cast of another show have finished their act by running into the street and lying down on the road, stopping the traffic in a situationist gesture. Joan Rivers looks on, bemused. Nicholas Parsons is queuing in a nearby chipper. In the distance, someone shouts: "is that a real gun?" I've been in Edinburgh for 20 minutes.

Located somewhere between the imaginings of Salvador Dali and Hieronymus Bosch, the Scottish capital in August, when it is home to seven arts festivals, is as much Lewis Carroll as it is Stephen King. You'll have to forgive the intertextuality, it's just we're all at it here. The hottest show of the 1,462 on this year's Fringe, and the strong favourite for the Perrier comedy award, is being described in terms of Picasso's first abstracts, Joyce's Ulysses and The Beatles' White Album.

We're in a cultural tizzy, then, as we take our seat for the Noble and Silver show. It seems to have started early, we say to the people next to us in a stage whisper. "No, it's supposed to be like this," they hiss back. "It's all about how preconceived images generate understanding."

Golly. Over the next 60 minutes, a collage of video, recorded sound and performance swirls around the sauna-like venue. We watch a video of us watching the show, a digital clock tells us we're 45 minutes into the performance, but we're not. The actors speak through ghetto blasters situated around the room.

There are kisses, dances and arguments. And a microwave. Very post-Ionesco, we muse. Thirty minutes in and we've got Noble and Silver sussed: they're merely blurring the boundaries between the synchronic and diachronic. And all for £12. Genius or self-indulgence? Let's just say Picasso, Joyce and The Beatles can rest easy. And far from winning the Perrier, Noble and Silver weren't even nominated.

After some hyperventilating and a restorative draught of cider - real cider, not a preconceived image of it - we slouch in to see Garth Marenghi's Netherhead show. Last year, Marenghi made his debut with the wonderful Fright Knight. He harboured hopes of winning a Fringe First theatre award and was shocked to find himself nominated for a Perrier instead (he lost to Rich Hall).

This year, he's in the guise of a dΘclassΘ Essex horror writer whose latest book is about an Egyptologist searching for the son he lost in a freak hang-gliding accent. Mixing extracts from the book - "his love was compact and utterly satisfying, like corned beef" - with an acted back story, this superb show is one of the best ever to grace the Fringe.

Marenghi and his co-stars, Alice Lowe and Dean Learner, parody and deconstruct not only horror writing but also performance. Jokes about the "fourth wall" collide with beautifully constructed sight gags. The plot is incidental: this is all about a sublime script and three startling, comic-rich performances, and it is a deserving winner of the Perrier.

Most remarkable about Noble and Silver and Garth Marenghi is how, in the microclimate of the Edinburgh Fringe, both shows were influenced by critically wowed shows of last year: The League Against Tedium and The Mighty Boosh, respectively. Taken as a quartet, they seem to indicate that the joke is dead.

The traditional stand-up format of a comic and a microphone simply doesn't satisfy Edinburgh audiences any more. Video walls, recorded sound and multimedia sophistication are the new punchlines. The content has also become darker and more absurd, as the twin gods of Peter Cook and Chris Morris are evoked in almost every show.

The banal blokeishness of yesteryear has been replaced by the imaginative and challenging narratives of Dan Antopolski, Ross Noble and Daniel Kitson, among others.

Kitson, a 24-year-old from Barnsley, in northern England, who looks like Vegas's uglier little brother, won the unofficial award this year for best show title: Love, Innocence And The Word "Cock".

A big hit at the Cat Laughs festival in Kilkenny earlier this year, Kitson makes great play of his body image. "I've fallen from the ugly tree and hit every branch on the way down," for example, or "I'm still unattractive, but now it's on my own terms."

What distinguishes Kitson, Noble and Antopolski from the pack is their eschewal of orthodox stand-up material in favour of libertine flights of fancy.

For something completely different, there were the explicit ruminations of Mike Wilmot, a Canadian comic.

His blue-collar parables of life at the relationship coalface could have sounded boorish and Old Skool, but Wilmot's self-deprecating manner and engrossing stage persona leavened proceedings.

Also challenging the orthodoxy was Adam Hills, a Dublin-resident Australian comic. While sinister cynicism and knowing parody informed most Fringe shows, Hills indulged in a shameless act of feel-good optimism in Go You Big Red Fire Engine, a show that was as refreshing as it was different. He worked the room like an old-time music-hall act.

There was nothing snide or sardonic here: Hill unites by his effervescence and enthusiasm. There was some smashing material about cultural awareness, but the overall feeling was of a comic evangelical rally.

Like Hills, Jason Byrne was nominated for this year's Perrier. He put in a series of surreal turbocharged shows that depended, as always, more on his natural ability as a comic than they did on scripted material.

His fellow Dubliner Dara O'Briain was unlucky to miss out on the Perrier shortlist - he made it to the longlist of 12 - but he'll be more than happy with the excellent reviews he picked up.

Away from the bigger names, there was a delightful afternoon show called Lloyd Cole Knew My Father, which saw the music journalists Andrew Collins, Stuart Maconie and David Quantick detail their lives in terms of backstage laminates.

Although some of their stories were overly familiar, such as anecdotes about Aerosmith and Ozzy Osborne, this was a jaunty and jocular look at rock reportage.

Spare a thought for poor Johnny Vegas, the potter turned raconteur, who one night managed the spectacular feat of arriving on stage only to throw up over the front row. Maybe he should have stuck to the Perrier.

Speaking of which, there were calls for comics to boycott the Perrier award, due to the involvement of NestlΘ, Perrier's parent company, in marketing infant formula in developing countries. It was good to see a peaceful protest outside the Perrier party, but bad to see so many comics - challenging, provocative, anti-authoritarian - blithely ignoring the controversy.

Elsewhere, a surprisingly normal-looking Emo Philips made a welcome return to the Fringe, raising the roof every night; the cult Dublin comic Ian MacPherson astonished with Chair; The Nualas made their farewell performances (they're breaking up) and there were a lot of complaints that no women had made it on the Perrier shortlist. Handy tip: it's not about gender, it's about ability. But a case could have been made for Suki Webster or Catherine Tate, both of whom were great. And Pinky and Perky made their festival debut . . .

And that was the Edinburgh that was. Still crazy after all these years.

Netherhead is due to come to the Pavilion Theatre, D·n Laoghaire, in October