Marvel or monstrosity? Adornment or madness? Delightful fantasia or ludicrous freak? The Royal Pavilion in Brighton is enough to set anyone wondering. This whimsical palace, built almost 200 years ago in a little South Coast fishing town-turned-fashionable resort, stands as a monument to a moment of fantasy. It surely must count among Europe's most peculiar buildings. It tricks expectation and sets an ambush for taste.

From the outside it might seem little more than some cranky anomaly: a sort of mini-Taj Mahal plonked down in the middle of handsome Georgian crescents. Its domes cut odd curves out of classical skylines. Rows of keyhole arches create an elaborate façade. But if you think that's strange enough, then you have to step inside. The famous pavilion offers the aesthetic equivalent of a fairground ride. It's utterly discombobulating. Because although on the outside it looks emphatically Indian, inside the decor turns out to be Chinese. Well, who's going to niggle over little distinctions? It all comes from the East. It's exotic. And isn't that enough? Clearly the Prince Regent was not one to fuss.

But are these priceless treasures or bits of eccentric tat? And why are they there anyway? This week, Brighton Museum puts on what probably counts as the most ambitious and lively exhibition it has mounted as it sets out to explain the raison d'être of the architectural prodigy in its midst.

Today the Brighton Pavilion has been reassembled to look more or less as it did before 1845, when Queen Victoria scattered its contents about various royal collections in readiness for its demolition which, fortunately, never took place. So prepare for the spectacle.

This seaside palace is a dizzying confection of all things Far Eastern, from its ranks of nodding mandarins through its silk-tasselled lanterns to its porcelain pagodas and goggle-eyed lions. A fantasy in which even the kitchens have been adorned with palm trees grows progressively more intense until it reaches its culmination in a giddying banqueting room adorned by enormous dragons and a hallucinatory saloon in which the reality seems to melt.

Western interest in China was awakened by the 13th-century explorer Marco Polo, who, whether he actually did or did not live in the mystical land of Cathay, aroused our fascination with a far-off land of wonder. In 1498 the Portuguese navigator Vasco da Gama found a sea route to India, which opened up trade with the East. By the late 17th century private trading companies were bringing back treasures and exquisite curiosities. But they were expensive and highly coveted and, in time-honoured fashion, they spawned a market for cheaper replicas.

It is the story of these that the show Chinese Whispers tells as it explores the British appetite for “chinoiserie”: for objects made in China specifically for the export market, as well as the “fakes” that were knocked up by Western craftsmen, and specially adapted to make them palatable to our taste.

The interest in all things oriental that flourished at the beginning of the 18th century had flared by the mid-1750s into a veritable mania. Perhaps it was hardly surprising. Stark Neo-Classicism must have felt rather constricting. Oriental exotica presented a tempting escapist alternative. It burst out as an adjunct to the frivolous French Rococo, found links with the extravagances of the Neo-Gothic, then flagged but came back again with the Prince Regent and had another revival in the 1920s.

And who cared if people knew nothing about it? They could get all the details out of a book. Olfert Dapper's Atlas Chinensis became a style guru's bible - regardless of the fact that the author, for all his elaborate observations, had never been to China.

Don't trust the truth of a thing that you see in this show. That's one of the most delightful and intriguing things about it. Even the teapot is not a genuine import. Its shape comes from the stoneware jars with spouts and handles in which the Chinese used to keep wine. But then chinoiserie is not about authenticity. It's about our Western fantasy of what the East was like. It's about the ways in which one culture chooses to interpret - and misunderstand - another.

The visitor to the Brighton Museum picks his way through three galleries displaying a rich, and sometimes rarely seen, selection of treasures picked from museums and private homes throughout the country. They run chronologically from an opulent lacquer-box-style interior, full of early chinoiserie, through the pale-green bamboo-garden-type spaces that reflect mid-18th century passions, to the peachy luxury that captures the sensual revival of the 19th and early 20th centuries. Here is anything from Lady Derby's silver chocolate cup with its faux porcelain patterns, any number of teapots with their weeping-willow framed scenes and pieces of furniture that range from the most delicate lacquerwork to fantastical dragon-twined chairs to the 1920s japanning of a gramophone box.

But as the spectator drifts through the treasures he hears the Chinese whispers grow increasingly warped. The flipside of our fascination was fear.

Chinoiserie, hardly surprisingly, tended to be treated as a pronouncedly feminine taste. It decorated the ladies' closets with enticing frivolity, adorned the fanciful private apartments where they would entertain their friends, and the delicate drawing rooms where they would host their fastidious and increasingly fashionable tea parties, gossiping over their tiny porcelain cups.

When it came out of the closet into the male domain it was seen as decidedly suspect. Homosexuality, of course, wasn't mentioned. But wasn't it all rather dodgy? As The Conoisseur put it in 1755, chinoiserie was fit only for men “of delicate make and silky constitution”. I mean, it might have been very pretty, but what about all those nasty oriental habits? The start of the opium wars didn't help.

A taste for chinoiserie was increasingly associated with corrupt behaviour. As a very readable and wideranging catalogue explains, the acquisition of porcelain became associated with irrationally rapacious females. Literary characters, from William Wycherly's Country Wife to John Galsworthy's Fleur Forsyth, committed their social transgressions amid Far Eastern ornaments. God knows what Lady Katherine got up to on that Chippendale day bed, or who flirted with whom from behind that fan. Surely they can't have been up to any good.

This show makes the point imaginatively by re-creating the fireplace setting from Hogarth's Marriage à la Mode - the real picture on loan from the National Gallery hangs above the mantel. It shows a faithless wife stretching lasciviously, signalling with flashes of a mirror to her waiting lover, while her drunken husband sprawls sleepily. The symbolic clutter of Chinese porcelain on the fireplace behind her is evocatively reconstructed in the gallery.

Perhaps it is unsurprising that the passion for chinoiserie gradually wilted. We are left with a few scattered mementoes of what was once a mania. These range from our British obsession with tea-drinking through the ubiquitous willow pattern to the Brighton Pavilion itself, that outrageous last gasp of what was then a flagging taste.

But, who knows? As the balance of political power shifts, we are probably due for another revival. Perhaps our mingled fear of and fascination for China will show us the fashionable way forward.

Chinese Whispers: Chinoiserie in Britain, 1650-1930, at Brighton Museum and Royal Pavilion (01273 292797; www.royalpavilion.org.uk), until Nov 2

CHINESE CHECKLIST - FIVE UNMISSABLE PIECES

The Duke of Sussex's epergne, by Thomas Pitts of London, 1761 The Rococo revels in a delightfully fanciful silver pagoda-shaped centrepiece that playfully mingles oriental design with royal ducal coronets.

Dragon Chair, by Thomas Wilkinson Wallis of Hull (1821-1903) Furniture fit for an emperor's throne graced the 19th-century drawing room at Burton Constable, in which the dragon in the family crest found new life in dreams of the East.

Chinese drummer-boy clock Even time marches to the tune of a jocular mandarin. A fanciful French 18th-century chinoiserie clock formed part of the Prince of Wales's elaborate furnishings at Carlton House.

Shoes, by Stead and Simpson Fashion takes flight in the 1920s in a pair of hand-painted satin shoes decorated with beads and exotic far-eastern birds.

William Hogarth's Marriage à la Mode Chinoiserie becomes the setting for marital infidelity in this satirical painting in which a lascivious wife flashes messages by mirror to her hidden lover while her husband slumbers.

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