"Fuckin' hell!" exclaims the excited voice sat behind The Quietus on the train as it hurtles from Stafford to Liverpool. Not two minutes earlier, the same lively character was gleefully explaining in loud and unintentional terms how he managed to dodge the train fare, much to the consternation of the Everton fans sat nearby, all of whom would've paid in the region of £70 to get from London to Goodison. But now something has got him excited and as he yells down his mobile phone, more rolling of eyeballs and sighing comes from the direction of the Blues.

"There's a psychedelic festival on in Liverpool tonight!" he cries. "Can you fuckin' believe it? And guess what? I dropped one about an hour ago and I'm fuckin' peakin' on this train! Fuck!"

With the time approaching 1pm, the realisation sinks in that this is going to be a long and potentially weird day. Which is as it should be.

What's most surprising is that it's actually taken this long for a festival of psychedelia to come together but the fact that it's happening in Liverpool makes perfect sense; this, after all, is the city that's rumoured to contain more copies of Love's >o?Forever Changes per square mile than anywhere else in the world; the hometown of the creators of 'Tomorrow Never Knows' – still the finest distillation of the LSD experience to be crammed into three minutes; the place where Will Sergeant picked up Robbie Krieger's baton before blasting off with it into the stratosphere; the port where... well, you get the picture. Psychedelia runs as deep and wide as the Mersey in Liverpool and as exemplified by any number of space cadets to have emerged from here in recent years – The Coral, Kling Klang, Clinic to name just a few – will continue to do so for time to come. Have spliff, will riff, right?

Held at Camp and Furnace, an impressive warehouse conversion, and spread over two halls – the large Furnace and the more compact Blade Factory - the Liverpool International Festival Of Psychedelia is probably the smartest and well dressed festival to have been held in the UK this year. All around are sharp feather cuts, mod cuts, Cuban heels, macs, paisley scarves, PVC boots and polka dotted shirts. Throw in a supremely friendly vibe, good food and a fine selection of drink and the scene is set for a day of wonderfully mindbending delights.

But most important is the music, a fantastic cornucopia of psychedelic delights that beats at the centre of this festival. An early highlight is provided by Koolaid Electric Co, whose swirling blues-infected sounds seem to float on the air as the band drives forward with a sharpened sense of purpose. All around in the crowd are slackjaws and wide eyes as the band's music is at once seductive and utterly captivating.

With such an embarrassment of musical riches on offer, it becomes impossible to catch everything that's on offer but what is encountered leaves a lasting impression. Retreating to the larger environs of The Furnace, The Quietus encounters South Londoners Palma Violets. A young quartet with energy and passion to spare, their organ-driven swirls coalesce with hard driving guitars and eastern-inflected scales and the effect is not unlike encountering Echo And The Bunnymen commanding a squadron of Panzers. Masters of melody, Palma Violets score a convincing victory.

Ramping things up several notches are local heroes Mugstar. As exemplified by tracks such as 'Black Fountain', Mugstar draw as deeply from the well of motorik beats as they do from the notion that music shouldn't be constrained by concepts such as space and time. Coupled with a constant series of visuals that frame their sonic explorations, Mugstar up the ante with an almost frightening precision that takes the psychedelic quotient to a whole new level.

To these ears, the festival's undisputed highlight arrives in the form of the mighty Dead Skeletons. To say that this set is highly anticipated would be to make a grave understatement. With The Furnace rapidly filling with expectant minds and bodies, the sense of excitement is palpable. Not that this should come as any surprise. In Dead Magick, Dead Skeletons seriously raised the paychedelic bar with a debut album that easily wiped the floor with many longer established practitioners of the genre. A rumination on the inevitability of death and the need for a meaningful existence before it, the music of Dead Skeletons is less about escape and more to do with reality. Which is something of a paradox at an event like this.

Augmented by drone's very High Priest of the Low End, former Spacemen 3 bassist Will Carruthers, Dead Skeletons have been getting down to some unorthodox methods in preparation for their current campaign. Indeed, if the stories circulating tonight are to be believed, the band took themselves off to Mexico for a collective shamanistic peyote ritual of such intensity and spiritual insight that they still struggle to verbalise and comprehend what actually happened to them sat around a campfire that night.

Tonight's performance is simply breathtaking. Despite a few technical hassles that sees Dead Skeletons take the stage 15 minutes late, this is a hypnotically bravura show that sucks in the attentive throng into heaving, frugging mass - the beats are utterly irresistible. 'Om Mani Peme Hung' is dropped early and any attempts to remain still throughout its duration proves to be an impossibility. Likewise the rollicking 'Get On The Train' which hurtles at a driverless pace while the closing 'Dead Mantra' is both terrifying and life-affirming in equal measure.

You'd almost feel sorry for any band that has to follow them but all credit is due to Hookworms. Taking the stage to a fraction of their predecessor's audience, Hookworms build and maintain attention thanks to a performance that's nothing short of compelling. At one point they threaten to collapse under the weight of their own effects as they create a vortex of sound that gradually reels in the listener until it becomes apparent that resistance is utterly futile.

Manchester's Plank! prove to be something of an exception to the norm. Eschewing motorik beats, Plank! employ more complex rhythms. The initial effect is somewhat jarring but this is to the band's credit. As displayed by an incredible reading of closing track, 'La Luna', a circulating bassline underpins a track that releases an incredible maelstrom of effects-laden colours that victory is theirs for the taking.

For their initial foray into bringing rock & roll's more wigged practioners under one roof, the Liverpool International Festival Of Psychedelia have scored themselves a 150 microgram hit. Curated with care and performed by bands with a rare joy, this is an event devoid of cynicism and one that embraces the Be Here Now mantra with a real sense of love. Here's to the next one.