Wimple Winch is not a name the average festivalgoer should be expected to know. This obscure Liverpudlian band’s career came to an abrupt end in May 1967, when their entire belongings were destroyed in a fire at a Stockport nightclub, the aptly named Sinking Ship. Yet in a steaming tent at the Green Man festival, in Wales, about 1,000 people are dancing wildly to Save My Soul, a three-minute burst of screaming, tempo-shifting rock’n’roll that is the closest thing Wimple Winch had to a hit. Save My Soul has been altered, too: drum patterns are elongated and quiet sections are shortened. A single that for the past 40 years has remained a niche-interest collector’s item has been turned into a dancefloor-filling smash through the power of a new phenomenon: the psychedelic DJ.

The duo getting the crowd — from young indie fans to ageing folkies — moving to Wimple Winch are Erol Alkan and Richard Norris, who make up Beyond the Wizard’s Sleeve. Their masterstroke is to create new versions of records that, because of their rhythmic shifts, are not what the average dance-music fan would term a “banging tune”. Technology has, to an extent, made this possible: Alkan uses a CD deck called a Pioneer CDJ, which allows him to loop sections, isolate stereo channels and run parts backwards — he might extend the drumbeat of an old psychedelic single over 10 minutes, for example. “The magic of these records lies in their natural feel and their swing,” he says. “The technology allows you to make the most of that human element.”

This year’s Green Man featured headlining slots from Jarvis Cocker and Animal Collective, but the real energy was fired up by the handful of DJs taking psychedelic and progressive music into the 21st century. As well as Beyond the Wizard’s Sleeve, there was the Amorphous Androgynous, who staged a 12-hour session that somehow managed to include a live performance by the hairy biker favourites Hawkwind; and Andy Votel, a Manchester-based DJ who uses his background in hip-hop to cut between everything from French rock to Turkish oud music. It’s a long way from the old model of a superstar DJ playing one 12in house track after another and being worshipped for it.

This new breed of DJ is making inroads beyond the dance tent. Franz Ferdinand hired Beyond the Wizard’s Sleeve to remix Ulysses; the result turned the polished art-rock of the original into otherworldly disco. Noel Gallagher heard a compilation album by the Amorphous Androgynous and, amazed by its blend of sitar tunes, pagan chants and quasi-spiritual messages, hired their flamboyant leader, Garry Cobain, to remix Oasis’s final single, Falling Down. What Cobain gave them was a 22-minute epic bearing little relation to the original: Alisha Sufit, of the obscure early-1970s raga-rock trio Magic Carpet, sings the lead, while the Gallaghers are relegated to backing vocals. Noel might have been forgiven for taking offence, but heralded it as “a staggering, monumental piece of music”.

“He’s an expansive, forward-thinking guy. He just waited until he was hugely successful before he let the world know about it,” Cobain explains. “There’s an ancient belief that you unconsciously choose when you are born. Noel and I are both from 1967, an important year in the pursuit of higher consciousness.”

Cobain’s mission to bring psychedelic music to the people is born of a desire not so much to play a few groovy tunes, but to seek enlightenment. In the early 1990s, he formed Future Sound of London, an influential electronic dance duo, with Brian Dougans. The pair produced moody, critically acclaimed electronica that culminated in a dystopian vision of a perished London: the 1996 album Dead Cities. Then Cobain had something of a breakdown — and an awakening.

Close to death after a bout of lead poisoning, he resolved that from now on, any music he made must be part of a wider spiritual quest. He took up yoga and meditation, and eulogised about the wonders of Donovan and Melanie: “I was known as the bloke from Future Sound of London who went mad. I would be playing classical Indian flute ragas, to the horror of former fans. The band got dropped and I ended up sleeping in my studio, going on about the wonders of organic vegetables to anyone who would listen. It’s taken a long time for Amorphous Androgynous to reach acceptance.”

After 10 years of being ignored, if not ridiculed, the Amorphous Androgynous’s approach is finally getting heard. They have been booked to support Kasabian, the inheritors of Oasis’s “band of the people” mantle, on tour, and their forthcoming album, A Monstrous Psychedelic Bubble Exploding in Your Mind, Vol 2, is already being cited as the compilation of the year.

“People are after a more colourful type of music, a more colourful way of dressing and, ultimately, a more colourful life,” Cobain says.

“I define psychedelia as the ability to see life as a limitless possibility, which is why all children are psychedelic beings. It’s also the reason I can maraud through the waste bins of history and collage musical detritus as I wish for Amorphous Androgynous.”

Less keen on the psychedelic tag, although forever searching for that childhood wonder at the new, is Votel. “I hate that word, because it makes you think of a fancy-dress party with someone in the corner playing a sitar,” he says. “The real purpose of the DJ is to turn people on to things they haven’t heard, and that has nothing to do with a fashion or style. You won’t open the doors of perception with the Doors or the Beatles, because it’s all been heard. But you might blow people’s minds with a 45 by a Korean band trying to sound like the Shadows, failing miserably and com­ing up with their own crazy sound.”

The real question the rise of the psychedelic DJ brings is: “Why now?” In the worst recession since the 1930s, do otherworldly sounds really capture the spirit of the times? Richard Norris looks to the acid-house movement of the late 1980s for an explanation. “Things were grim then, just as they are now,” he says. “So it is escapism. But if that leads to open-mindedness and an anything-goes mentality, it can only be a good thing.”

A Monstrous Psychedelic Bubble Exploding in Your Mind, Vol 2, is released tomorrow on Platipus

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