John Mortimer confessed that the two kinds of stories he couldn't bear at dinner parties were people describing their dreams or explaining plots of films. Film is of course a kind of dream language, and the same is true of game worlds – visual, kinetic, mysterious. "A giant zeppelin crashed into my house! A large bear came over and asked for directions! Four dragons were dancing in a giant glass of champagne!" The visual anarchy, the lack of familiar reference points, the psychedelic excess, the sheer strangeness are hard to share. Sometimes you just had to be there. If you've heard someone describe an acid trip, you know what I mean. This makes trying to give an impression of what it's like to be in Second Life or World of Warcraft or any virtual world a challenging task. A description of a balloon ride in Second Life at the beginning of Tim Guest's book nearly succumbs to these dangers.

Yet Guest is a writer of great clarity and elsewhere he does an excellent job of evoking the feeling of being initiated into the shared hallucination that is a virtual world – in Second Life, the oddness of resizing your feet to fit your shoes, or trying out a cash machine, which he says work differently from the ones in the real world. He put some money in. It said, "Thank you." He catches well the poignant moments that the masking of the virtual space can create – such as approaching his father in World of Warcraft only to hear him say, "Sorry, I can't talk, I'm waiting for my son."

Guest writes well about his own initiation into Second Life and other game spaces, and also provides a swift canter through a brief history of the evolution of virtual worlds. He's well equipped to do this as a keen gamer and columnist for Edge, by far the smartest and most thoughtful games magazine. The games history is good stuff, but the passages which really come alive are the ones in which he examines from the inside the appeal and the problems these worlds create – experiencing the odd pleasure of simply sitting in his virtual office, staring out of a virtual window, or nipping away from a dinner party to check in on his Second Life. Guest is very good on the blue pill Matrix moment which separates the initiate from the outsider – the point at which participation in the virtual world becomes immersive and you're simply somewhere else – as one world indicates in its stark name "There". His avatar is interviewing someone else's avatar in Second Life when suddenly, he's there – in the room, talking to another person, enmeshed in the scene, his disbelief suspended.

"I had forgotten myself. Like a moviegoer entranced by the screen, I had become what I saw... I had entered the virtual world."

If you don't get this act of psychic immersion and see that it is essentially imaginative, using the same muscles we use when we read, and that it doesn't need goggles or head-up displays, you won't understand why millions of people are spending money and time online in virtual worlds. Of course these worlds aren't real – but they're real enough: they feel real to the people in them, and there's a big business in providing them.

The book ends with an extraordinary description of the life of the player of Lineage II, a massive online game played in South Korea by millions of people. The top player, the King of this virtual world, is a very ordinary man who runs a hamburger restaurant – a restaurant which isn't doing very well because he's neglecting it to maintain his power and status in the game. In the game he has thousands of supporters, heads up a complex political and military structure, and wears the responsibilities of his position heavily.

Back in the real world, the King of Lineage lives alone and distrusts his staff, working long hours with little hope of respite. Given a choice, he would choose to live in the game world rather than the real world. He has chosen the Matrix rather than life. Guest knows a thing or two about cults, because of his experience growing up in communes that supported the Baghwan, which he recounts in his excellent book, My Life in Orange. He's well positioned to respond to the joking remark of Second Life’s chief executive, Philip Linden, that "we like to think of ourselves as the good cult." "They all do," Guest says.

As Guest points out, writers get their education in public, and there are a few incorrect details that may annoy people who are more deeply enmeshed in the worlds he covers – pedants, start your engines. Yet the grand sweep is there: the understanding that virtual worlds are important because they offer an escape that seems to speak to the problems of modern life. He avoids the twin perils of naive enthusiasm or reflexive doom and catches the ambivalent mixture of idealism and hedonism which underlies all our attempts to try and leave this all too solid flesh. If you want to get your head around virtual worlds, this is the one book you need to read.

Second Lives, Hutchinson, £12.99 (368pp, paperback)

Available for £11.69 (inc p&p) at the Books First website or on 0870 165 8585

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Michael Parsons, now editor of CNET.co.uk, was once European correspondent for The Red Herring magazine, and spent five years working in Silicon Valley and worrying about technology. He can be reached at michael.parsons@cnet.co.uk