It's a rare record that can combine celebration with genuine, teeth-bared anger, but 20 years ago, Masta Ace managed it with some aplomb on his second LP. The Brooklyn rapper's focus was on hip hop music, the beloved art form he drew inspiration from and hoped to add substantially to; but he was operating in an era where the threats to the culture were as inescapable as the opportunities it potentially brought its practitioners. It was a complicated time, filled with possibilities and pitfalls: and SlaughtaHouse - a thoughtful, impassioned and uncommonly great album - is a suitably fascinating document of it.

OK, so SlaughtaHouse didn't go multi-platinum, and Ace has remained an artist more feted among the cognoscenti than lionised by the masses: but some people were listening - Eminem has cited him as a key influence - and the handful of records he's made since (up to and including last year's collaboration with MF Doom, a tribute to Ace's late mother called Son Of Yvonne) have proved consistently and durably excellent.

This record hardly came out of nowhere, Ace having long staked his claim as a hip hop innovator and a rapper of wit, substance and style. In 1986, during his third year of college, he won a rap contest at a roller-skating rink in Queens, securing as his prize six hours of studio time with the already legendary producer Marley Marl. Their initial sessions yielded a couple of singles, released under the name Ace & Action and implying that this was a band, but in reality the artists were Ace and DJ Steady Pace; the slightly confusing moniker was soon abandoned.

Immortality beckoned in 1988, when Ace found himself unexpectedly taking point position on what was to become, if not the first, then certainly one of the greatest, rap posse cuts of all time. Marley was working on an album that would become In Control Volume 1, and had convened a photo shoot at an airfield in Long Island where sundry members of his celebrated Juice Crew of emcees would be photographed on and around a Lear jet. After the shoot, Marley had planned a recording session at his home studio, by then relocated from the Queensbridge projects to Astoria in Queens. The intention had been to get the Juice Crew's A-Team - MC Shan, Craig G, Kool G Rap and Big Daddy Kane - to record a song together for the album. For reasons that remain the subject of some debate, even among the protagonists, Shan abruptly decided he didn't want to be involved; Marley decided to go with just the three emcees, and Ace, still the newcomer, keen to learn from any chance he got to watch his contemporaries at work, asked if he could tag along.

After some time spent writing to the beat Marley had built - a pugnacious track single-mindedly constructed from a loop of Otis Redding's 'Hard to Handle' - there was reluctance among the three more experienced rappers about who would drop their verse first. So Marley asked Ace if he would rhyme for a while, just to break the ice. There was no thought in Ace's mind that his verse would remain on the track - him rhyming was purely a producer's device to get the ball rolling at the session and encourage the other three emcees into their stride. The verse itself was one he'd written some time previously but not yet used on a song; as far as he was concerned, he was just performing a kind of maintenance service on the session, greasing the wheels for the hitmakers who would do the real work afterwards. At this stage, the track wasn't even finished - pretty much all Marley had down when the rappers recorded their verses was the Redding loop. But, about a week later, Ace started getting phone calls from friends commending his work on the song: Marley had quickly wrapped up the production and got a tape of an unmixed version out to New York radio. 'The Symphony' would go down in hip hop history as one of the genre's classics - and the little-known Ace was not only the first rapper on it, but the catalytic factor that made it happen.

His debut album, Take a Look Around, arrived in 1990. An excellent, musically rich, lyrically adventurous set which showed a single rapper could tackle themes that ran the gamut from unflinching street-life narratives ('Brooklyn Battles', 'The Other Side Of Town') to inspirational self-improvement philosophising ('I Got Ta') to a kind of bragging that undercut the pretension and bombast of much of the rest of the hip hop field ('Music Man', innovatively using a sample Ace found among Marley's record collection from rock monsters Grand Funk Railroad), the record was a triumph - but it failed to set the rap world on fire. There were some demands made by the Cold Chillin' imprint's corporate parent, Warner Brothers, which Ace wasn't keen on - the key one being the choice of 'Me And The Biz' as the first single. The song, in which Ace impersonates his labelmate Biz Markie, was originally intended as a duet, and Ace's recording was supposed to be a jocular guide vocal. But differences between Marley and Biz nixed the rapper's involvement, and the producer urged Ace to include the track as-is on the album. Once it had been declared as a single, of course, there was a need for a video: and despite becoming one of rap's best-loved promo clips, in the immediate aftermath of the single and the talent-show-audition video, Ace feels his career suffered.

"Warner Brothers forced my hand on that situation," he told me in 2003. "It wasn't something I wanted to do, but they told me in no uncertain terms that if I expected any support from them in terms of marketing or promotion or anything, that I needed to go along with them on their choice for the first single. I wasn't trying to be a gimmick rapper. If you listen to the rest of the album you'll know I wasn't all about jokes and games and being funny - that was just a nice light song to loosen the album up a little bit. But that's typical of a corny major - they wanna run with the one record that has a little gimmick, thinking that'll be the one. They could care less about where it puts your career, they only know that that's the record people might flock to."

Whatever the reason, Take a Look Around fell between stools - perceived to be not as hardcore as labelmates Kane or G Rap, but still too street to get on the playlists of those gravitating towards hip hop through De La Soul and A Tribe Called Quest, the record failed to turn Ace into the star his music merited. A rethink was clearly in order, and it came during the intervening three years, as the rapper convened a group, changed his stage name for a third time, and left Cold Chillin' for the west coast-based Delicious Vinyl label. The imprint, which had built its name on sample-heavy Dust Brothers productions for Tone Loc and Young MC, and was in the process of turning The Pharcyde into stars, seemed like a shrewd move for Ace: the sampleadelic aspects of his debut suggested he'd be a good fit alongside the rest of the Delicious roster. A well-received appearance on the Heavy Rhyme Experience Volume 1 album, which paired a string of rappers with British acid jazz/funk outfit the Brand New Heavies - and which was released in the US by Delicious Vinyl - seemed to confirm the supposition.

But the album that emerged in 1993 wasn't exactly what many listeners might have expected. Partly this reflected an enlarged creative contingent - Ace was now a band, Masta Ace Incorporated, which included the rapper Paula Perry, rapper-producer Lord Digga and R&B vocalist Leschea. There was little work for any of them behind the mic - Perry appearing on two tracks, Leschea just one - but Digga got a few verses in, and, alongside his Bluez Brothas partner Witchdoc, he co-produced five of the tracks. Mostly, though, the different sound and approach was down to the fact that Ace didn't just make music from within the context of his personal experiences in the rap industry - this was an emcee who couldn't avoid looking at the bigger picture, which, in 1993, meant the inexorable rise of the fake gangsta. It was a picture he found repulsive.

"I remember this one night I was listenin' to the Stretch and Bobbito, a radio show back in New York," Ace told me in an interview conducted during the Jack The Rapper convention in Atlanta in August, 1993. "They always have special guests on, and they'll rap some freestyles and stuff. And these guys came on and they had a little interview, and they were like, 'Let's play one of your old records.' They played an old song, and it was like a rap love ballad - I guess it came out in '91 or somethin' like that. And they played that, and it was real corny, real sappy - talkin' about, 'Hey baby' this and 'baby' that. Then they went on with the interview, and they were like, 'Do you wanna do a freestyle?' And the guys were like, 'Yeah, yeah, we wanna do a freestyle. That old record - that's old. We not on that no more. We on some hardcore stuff now.' And they threw the beat on, and they went through every gun that exists. They were like, 'I got my 9mm, my Uzi, bow bow! Bash! Crash!' It was ridiculous - it was like night and day. And this was all within a year's time - they changed the whole name of the group. I don't recall the name, but it was like they went from the Love Brothers to the fuckin' Gun Posse in the matter of a year and a half. And they just made a fool of they selves on the radio, and I was drivin' home from the studio when I heard that, and I was like, 'This is ridiculous.'"

This was the incident that set Ace off on the direction his second album follows. The title track - the album's second single and the first proper song, after the largely introductory 'A Walk Through The Valley' - is the record's conceptual lynchpin, and its most deeply and darkly comedic moment. Its first half features two fictional rappers, MC Negro and The Ign'ant MC, running through a litany of gangsta rap cliches that would win bigger laughs if they weren't so painfully close to the sort of crap being peddled by the second wave of artists who'd got signed to labels in the wake of The Chronic and the emergence of rhymes about black-on-black gang violence, misogyny and sociopathy as the music industry's latest money-making formula. "Chainsaw in my holster," one of them claims; "body parts in the freezer"; "only wear black an' I don't know how to act." Then suddenly the track splinters, and over a chant of "Death to the wack emcees", Perry and Ace step onto the beat, righteous avengers come to put down the fake gangsta uprising. "Ninety-nine rappers wanna kill to sound ill," Ace raps: "You couldn't find their brains with a drill." And, right on cue, a Black & Decker [Other power tool brands are available - Ed] fires up.

It's still a brave, bold statement - a rapper taking an aural blowtorch to the industry he depends on for his commercial viability. But at Jack The Rapper, there was another layer of complication. While Ace and I spoke in a room in the city's Marriot hotel, a string of "studio gangstas", wannabes trying to parlay half-thought-out rhymes about automatic weapons and blunt smoke into million-dollar record deals, were prowling the lobby, trying to buttonhole radio playlisters and record label execs during the three-day event that was the hip hop equivalent of a trade exhibition. I'd assumed Ace might have been shunned by his peers for implicitly calling so many of them out on his new record, but the opposite had been the case. "Everybody seems real friendly to me!" he chuckled, acknowledging the irony. "I think that everybody's bein' friendly because they don't want to think that it applies to them. 'Well, it's not me - he's talkin' about these other guys.' I guess that's why everybody's bein' friendly. Nobody wants to assume that they're the wack emcees that we're talkin' about."

But what makes SlaughtaHouse so great a work of art is that, while the incipient destruction of hip hop culture through the industry-created rise of the talentless fake gangsta is its key theme, it's far from its only subject. Indeed, it's only the title track that explicitly and specifically goes in to full-length detail on the topic: elsewhere, Ace and his associates zoom in on the effects of the self-loathing and the societal damage done by those who peddle lowest-common-denominator bullshit to audiences far too ready to accept it as authentic. If the album was a film, it would have been shot from a dozen or more different vantage points, as if the director had put cameras in buildings on four sides of a city square, the lenses trained down into the centre, showing the action from every angle. Each song is different, yet each ends up revealing another part of the complicated and compelling whole. The reportage Ace had shown consummate skill for on tracks from his debut such as 'Brooklyn Battles' is morphed, on 'Late Model Sedan', into a lament, and 'The Big East' takes up the theme of black-on-black crime's antithesis of the inclusion and affirmation hip hop had promised to bring to the communities that spawned it. In 'Who You Jackin'?', Ace and Perry take on the roles of, respectively, a mugger and a woman ready to defy the statistics and ensure she's not his next victim - and thereby show how a first-person, ostensibly "gangsta" style, can be used to show how strength, resolve and determination can trump violence and negativity. And it's all done with plenty of unforced humour, from the kind of juxtapositional joke that underpins 'Saturday Nite Live' (contrasting street stick-ups with the comedy TV institution and its promotional catchphrase), to the grimly determined satire of the title track, and on through the little isolated gems of lyrical and musical invention that pepper every song.

'Jeep Ass Niguh' - the album's first single - shows how some of rap's attitude and steel can be translated into more politically provocative statements without losing a streetwise edge. The song follows in the vein of Public Enemy's 'Get the F--- Outta Dodge' by critiquing police clampdowns on New Yorkers who play loud rap in their cars, and tapped in to the early 90s vogue for bumping big beats in 4x4s (DJ Premier, famously, used to road-test each and every one of his new productions by driving round the five boroughs with it playing on his in-car stereo, while Public Enemy's endorsement of car-borne hip hop was so strong that Terminator X's solo album arrived under a name that implied he had formed a band called The Valley Of The Jeep Beats).

Best of all is 'Boom Bashin'', ostensibly a brag, but which illuminates the album's other key theme, and arguably its most important: that hip hop is about creativity, and that revelling in and developing that creativity can and should be a joy. Sure, the medium is combative - but like sport, not war. So Ace has fun with his boastful demonstrations of lyrical dexterity and rhythmic vocal innovation, turning around what might be criticisms levelled at him to make them declarations of his artful toying with rap's formal rules and aural cliches ("death-defyin' like a circus/I work this/mic - you can't jerk this/off-beat on purpose"; "I'm slick and I'm quick/Up my sleeve is a trick/So what? I use 'Funky Drummer' - suck my dick") and generally just having a lot of fun with both the words, and the delivery thereof, across the album's slickest beat.

It's also the track where the theme of the title track is most explicitly investigated. The song opens with arguably the record's key question, posed from amid a declarative statement of supreme competence and confidence in the art of the emcee: "Here comes the boom, with the hip hop bash/as I smash and crash:/How many gangsta rappers are gonna last?" And while an empirical view of history suggests his answer may have been unduly rose-tinted ("Not one"), in broader cultural terms, his prophecies came true. "When I made it I wasn't sayin', 'I'm gonna make this and everyone's gonna stop doin' this'," he told me 20 years ago. "I'm just speakin' how I feel. I think, subliminally, it's gonna make some artists... or, at least, new artists comin' out - it'll make them think twice before they write that next line that says '9mm blah blah blah,' or whatever. They'll think twice before they write that. I don't know if it's gonna have any long-term effect - we'll have to see. If it doesn't, then, in the next year or so, you'll see a real MC Negro and Ign'ant MC sellin' millions of records on TV doin' the same shit."

Masta Ace appears at Incubate Festival on Friday September 20