Up and down the beach, young western men are unzipping their shorts and peeing into the Gulf of Thailand. Behind them, under the light of the full moon, thousands more shirtless, shoeless Europeans are massed outside 14 beachside bars, their knees bending awkwardly to a soundtrack of the Black Eyed Peas, Justin Bieber and generic drum'n'bass. And squeezed between the bars and the crowds are 35 wooden stalls, each selling plastic buckets filled with a litre's worth of vodka and Red Bull. The stalls are daubed with deeply dubious slogans, ranging from the lurid to the the moronic. "No Bucket No Boom Boom", "Fuck My Buckets", "Everybody Fuck My Strong Buckets" – that kind of thing.

Welcome to the Full Moon Party, the largest beach rave in the world. Twenty-five years ago, this was a little-known hippy hang-out on the remote Thai island of Koh Phangan. Today, frequented every month by between 10,000 and 30,000 European youngsters, the all-night party is the ultimate destination on south-east Asia's "banana pancake" trail; a mecca for footloose gap-year tourists. This party scene, right here on this beach, is arguably the epitome, the pinnacle, of the modern gap-year experience.

Three weeks ago, the chief executive of the universities and colleges admissions service (UCAS) declared to a Sunday newspaper that "the golden age of the gap year is over". Mary Curnock Cook argued that while in the past "a gap year has been when young people take a nice break and go out and see the world", the period should now "be used in a focused way to support an application to the course or university you are targeting". In a year when the number of university applications – a record 660,000 – has dwarfed the number of university places available – 450,000 – Curnock Cook may have a point.

But this is a point that has yet to trickle down, in practical terms, to the nation's school-leavers. In fact, the vast majority of gappers do not use their year-out in anything approaching a fashion that might – in the eyes of universities – be viewed as "constructive". Every year around 160,000 British school-leavers take a gap year before entering university. More than 80% of them, says Richard Oliver, chairman of trustees at Year Out, "just go off and travel independently without any real purpose. Sun, sand and sangria, as I call it." Indeed, the trend might even be away from the year of constructive good deeds that Curnock Cook might be thinking of – a trend towards increasingly mindless hedonism. Hans Hoefer is the founder of Insight travel books, and the man who co-ordinated one of the first guides to Thailand back in the 70s, when fewer tourists visited the entire country (150,000) than now visit Burma annually. These days "gappers" touring Koh Phangan and its surrounding islands are, says Hoefer, "not experiencing anything apart from tourism. It's an absolute joke. They don't want to understand the culture – they just want to binge. I don't understand why they go."

Attempting to understand why they go, however, why this is the modern gap-year experience, is exactly what brings me to the Full Moon Party, surrounded by scores of topless teenagers urinating into the ocean to the words of the Black Eyed Peas' "I gotta feeling/That tonight's gonna be a good night/That tonight's gonna be a good, good night." What exactly is the lure of this beach to teenagers who are, after all, meant to be Britain's brightest? I'm here to find out.

When gappers touch down in Bangkok, their first port-of-call is almost always the backpackers' ghetto on the Khao San Road. In The Beach, Alex Garland's 1996 novel about a young man's search for adventure in Thailand, Khao San is described as a decompression chamber between east and west. But when I arrive, it soon becomes clear that even this is a generous description; the Khao San Road actually doesn't feel like it's in Thailand at all. The street is crammed with bars showing premiership football; Britney Spears and Bob Dylan blare out of every speaker; hawkers selling European T-shirts jostle with those selling fake British ID cards. This April, 20 Thais were massacred in clashes between soldiers and anti-government redshirt protesters barely 100 metres from the Khao San Road. But it might as well have been 100 miles away: the Khao San's tourist festivities were barely disrupted. And when Alex, a well-travelled graphic designer from west London who "took several gap years", muses to me that "the Khao San just feels like home", he's spot on, though perhaps not in quite the way he intends: apart from the fat, bald westerners parading their suspiciously beautiful Thai girlfriends, the road could be a carbon copy of Camden High Street.

In years gone by, backpackers travelling onwards to the Full Moon Party might have briefly escaped this westernised gauntlet by taking the overnight train or bus down the coast to the ferry terminal of Surat Thani. Today, however, it's almost as cheap to take the plane down – and so this is what photographer Sean Smith and I end up doing. A couple of cramped ferry journeys bring us finally to Koh Phangan, and it isn't long before I'm talking to the cream of British gappers.

"You know what the worst thing about travelling is?" asks Londoner Jez, 19 years old, dressed in a vest, and approaching the end of his year out. He enlightens me: "TOURISTS." It's a slightly strange answer: we're sitting on the side of a dirt track near the centre of Had Rin, the main tourist town on Koh Phangan, and venue for tomorrow's Full Moon Party. Tourists are whizzing past every 30 seconds on mopeds belching out acrid fumes. Every second shop is an internet cafe packed with tourists checking Facebook. Every third shop is a travel agent's filled with tourists plotting their next move. It's an odd place to visit if you don't like tourists. And particularly if you yourself are one.

But Jez – a warm, welcoming guy – doesn't think of himself as a tourist: he's a backpacker. "Most of the people here are backpackers," he insists. "Backpackers are infinitely different to tourists. Backpackers will accept anyone. Whereas tourists are the kind of people who back home would end up in fights. But backpackers have no interest in fighting anyone, do they?"

Jez directs this question at Pete, an even friendlier backpacker whom he met a few months ago in Vietnam. Pete, earringed and also wearing a vest, is 23, British and on a different kind of gap year; he's been given a year's leave of absence from the army. For most of his time off, he has been working as a promoter for a bar in Vang Vieng, Laos, but he's back in Had Rin for one last Full Moon Party.

Pete couldn't agree more with Jez. "Yup," he says. "Tourists are the people who spend their time fighting here. Tourists are people who go on holiday for two weeks." He pauses, then adds: "So if you can, put in the Guardian, somehow, that this is not a place where you can go for two weeks. This is a place for backpackers. Tourists may pay more money, but they're fucking idiots."

Pete's not sure I've got the message, so he leans in once more. "Where I work in Vang Vieng, I saw these two tourist girls with handbags, wearing skirts and dresses. But in Vang Vieng you should be wearing a bikini, and nothing else. So I said to them, 'You girls are a fucking disgrace, get the fuck out of here.' And my job is to get people into a bar! So I've ruined the chance of those people coming into my bar. But that's how much backpackers hate tourists."

In The Beach, Richard, the protagonist, is told that "Hat Rin's [sic] a long way past its sell-by date. They sell printed flyers for the full-moon parties now." And that was 14 years ago. But to Jez, even in 2010, the town is still sacred. "I just fucking love this place," he says, "because it just sums up everything about youth. Ten thousand people condensed into one area where they can do every single thing they want to, without any regrets. Back home, you get really shit-faced and there are repercussions. Out here you can do what you want. It's somewhere like Ibiza before it turned shit. It's way cheaper, too."

And, of course, there are the backpackers. "As most of the people here are backpackers," Jez re-explains, "you'll be walking along and you'll see someone you know. And then you'll see them again and again. All the people you've met while you're travelling will be here. It's just awesome."

The drugs are also a big draw. These guys know exactly which pharmacies sell speed – and what to ask for when they're at the counter. They know where to go to buy weed, and can name the three bars in town that list magic mushroom milkshakes on the menu.

Sounds fun, I say, but if everything here is all so western and familiar – and if they're spending most of the week off their heads – are they really experiencing Thailand? Pete is brutally frank. "This isn't a Thai experience," he admits, instantly. "This is a party experience. Chiang Mai and Bangkok, you get a Thai experience. Koh Phangan is a party place." Jez agrees, but is quick to emphasise that, for them, the "party experience" is a supplement to, and not a replacement of, the "Thai experience".

"We've gone through the Thai experience," Jez clarifies. "We've seen it, we've done it. So for us this is just a nice way to cap it off and celebrate what we've achieved, all that we've been through. A lot of people just see the Khao San Road and here – and they're tourists. They're not travellers. They're not going to learn anything here about Thai culture. Whereas going to places like Chiang Mai, you just learn so much about their culture of respect, and the emphasis they place on those . . . those aspects."

Jez and Pete are having a "shroom" session with some of their many backpacker friends that evening, and, true to their backpacker philosophy, they invite me along. And so, a few hours later, we rendezvous once more in a bar built high above Sunrise Beach (where, in 24 hours, the Full Moon Party will take place) – a bar nicknamed, for reasons which soon become apparent, Mushroom Mountain. Turnout is lower than expected; Jez and Pete are joined only by two second-year medical students from Nottingham – Hailey, who took a gap year, and Laura, who didn't.

When I raise Curnock Cook's comments, I get: "That is one of the stupidest things I've ever heard," from Jez, who will start at Newcastle this autumn, studying philosophy. "Taking a gap year was probably the best decision I've ever made. It's taught me more than 18 years in school ever did. I could write you an essay on Shakespeare or tell you the strengths and weaknesses of Immanuel Kant's Critique of Pure Reason, but at the end of the day that means fuck all in the real world, unless you go out and experience it. And fair enough, Koh Phangan isn't really the real world, but it's still an experience.

"I met a guy three days ago who'd done five tours in Iraq and Afghanistan, and he was telling me that during a Full Moon Party in 2008, he'd had to pull two Swedish girls who'd washed up, dead, out of the sea. To meet people like that, to see the lives that people go through, to escape the private-school bubble that a lot of kids end up in, it really opens your eyes to stuff. Shows you how life isn't just about getting good A-level results, getting a good degree and a good job."

Hailey's gap-year experiences were slightly different to Jez's. She didn't go travelling at all, she says, but spent the entire period working in a hospital in order to enhance her application to medical school; a perfect exemplar of the kind of gap year favoured by Curnock Cook. In many ways, though, she wishes she'd chosen a more relaxed path. "I don't know if I should say this," she starts, pauses, then continues: "I was in a verbally abusive relationship for three years, which meant I had no self-confidence. And I turned into a bit of a slut on my gap year because I was really messed up in the head. And then I went to uni, and I thought, 'I don't want to be either of those people I've been, I want to be someone else.' So then I sort of had three personalities. But coming out here on my own, having to go over and talk to people, having to be nice, not an asshole . . . It's been great. It teaches you how to socialise properly. It makes you so much more confident. Coming out here, travelling on your own . . ." She trails off, and then hurriedly starts again: "If I'd done the whole travelling on my own thing in my gap year, I would have been slightly less messed up at uni."

I'd been warned that as Full Moon night grew messier, the beach's toilets would be rammed full of lady-boys at work, their feet three-inches-deep in urine. Old hands predicted that when the sun rose the following morning, the sand would be carpeted with couples rolling around on a terrine of broken bottles, cups, buckets, straws, pills, lost flip-flops and unconscious drunks. This isn't quite how it happens on this full moon though. Certainly, the music is crap, and there are sordid aspects – the bucket stalls; the odd party-goer collapsing to the floor; one man vomiting into the sea beside that long line of urinators. But, despite being sober and solo, I find the atmosphere surprisingly euphoric, and my overall memories are of smiling dancers whose moves became more liberated as the night rolled into morning.

One such happy chappy is Francesco, a 19-year-old gapper from Bournemouth whom I encounter near a giant fiery skipping rope. "Mate," he says cheerily, "throw away that notebook, get a bucket, and just get TRASHED." Francesco would probably be described by official backpackers as a tourist – not that Francesco himself would mind. "There's different ways of travelling," he says. "This is about getting smashed. Getting in the buckets of Chang" – a local beer – "and just going for it. Back home, you walk in a pub, you get ID'd. Out here, you just lose the plot."

Working-class Francesco comes from the opposite end of the gap-year spectrum to most gappers I meet. "I had to work night and day to get here," he says. "I went round all the hotels back home trying to get work. I ended up working seven days a week, in a call-centre by day, and a pub by night." For him, then, the Full Moon is a once in a lifetime event, and it's hard to begrudge him his utter elation at being here.

There is though one group who seem less enamoured with this event: the locals. Though the Full Moon might be the festival highlight of the year for most of the gappers, tourists and backpackers on the beach, for the Thais that run it – and clean up after it – the party must seem like a monotonous, monthly chore. As Charlie Cassidy, a tall, bald expat who has lived in Hat Rin for the past decade, explains, "The locals don't actually go to the Full Moon. We go to the after-party up the hill the following morning. The Full Moon's just for the kiddies."

At four in the morning, I visit The Rock, a bar perched high above the sand at the opposite end of the beach to Mushroom Mountain. At the back, staring out over the partying crowds below, stands the long-haired Sutti Kuasurkul. Sutti's the man who opened Had Rin's first backpacker accommodation in the mid-80s – the Paradise Bungalows next door – and who, legend has it, organised the first Full Moon party shortly afterwards. But rather than smiling proudly at the institution he inspired, Sutti merely looks on forlornly, face motionless, eyes dulled. Would he mind answering a few questions about the origins of the party, I ask him? He shakes his head. Maybe tomorrow, or the next day, he says, before disappearing downstairs.

"Sutti doesn't really like talking about the party," explains Charlie. "For him, the Full Moon's just some farewell party he held for an Aussie mate back in the 80s, which just happened to catch on." Sutti, it seems, isn't too enamoured with what the party's become. "Sutti?" asks Charlie, rhetorically. "He'd rather be fishing."

Fifty metres away, in the DJ's booth at Paradise Bungalows, sits Burmese immigrant DJ Shine – or just plain Shane to his friends. Shane's 25 and he's lived in Had Rin since he was 16. This, then, is roughly his 50th Full Moon as a DJ, and his 100th overall. And Shane's bored – bored with playing the same electro-house on the same broken CDJ to the same crowds. He speaks perfect English, complete with a cockney accent, but he's never been to Britain, never visited the British friends he's made during his time on the island. And so, as he plays mix after mix after mix, month after month after month, Shane stares out at the thousands of Europeans who will soon be flying home, and wishes he could one day go with them. "But," he says, "I just can't afford it."

Up and down the beach, young western men are still unzipping their shorts and peeing into the Gulf of Thailand. Though I never took a gap year, never took the chance to either let my hair down like this, or do something more constructive, nothing that I've heard or seen here makes me want to join them.

Some names and details have been changed.

For more on travel gap years, go to

www.theguardian.com/travel/gap-year-travel