If you believe the NME's new list of such things, 19-year-old Alex Turner is currently the coolest person in the world. The lead singer of Sheffield's Arctic Monkeys has seen his band rise this year from unsigned obscurities to a No 1 single with their first official release, while provoking hysterical scenes outside oversubscribed venues they surely have no right to fill. They've been dubbed the leaders of an internet-based music community that could turn the conventional industry to dust, and been compared favourably to the Sex Pistols and Oasis. A lot of this is the usual hype. But beneath it is a truly heartening story, which has helped make 2005 the most optimistic time for pop in years.

The Arctic Monkeys' own tale couldn't be more conventional. Turner and guitarist Jamie Cook, friends since they were children, formed the band with drummer Matt Helders and bassist Andy Nicholson in 2001 while still at school, having seen Sheffield friends do the same, and reasoning it "wasn't hard". But it was their decision to hand out free copies of their demos at gigs that started the chain reaction that has shot them to success. Impressed recipients swapped tracks on the internet, forming a self-generated community of fervent fans before the record industry even knew the Arctic Monkeys were alive. By May 2005, they had signed to Domino, home of Franz Ferdinand. By October, their first London headlining show had sold out the 1200 capacity Astoria, shortly before their first full release, "I Bet You Look Good On the Dancefloor", stormed straight to No 1. The record industry, completely outflanked, was left gasping for breath. Ever since, people have been asking how it happened, and why.

The first element that goes deeper than hype is the music. The single that took them over the top and onto Radio 1, "I Bet You Look Good On the Dancefloor", was a tightly controlled, thrilling burst of energy, about romantic frustration and claustrophobic nightclub rituals. Beyond fan-traded MP3s, the limited EP 5 Minutes With the Arctic Monkeys was meanwhile the first introduction to their world of small-town Saturday nights and potent teenage dreams. On it, "From the Ritz to the Rubble" described being turned away from a club, and a Sunday morning comedown, with easy poetry.

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Such scenes and feelings are shared by many of the best bands who've broken through this year, such as Newcastle's provincial outsiders Maximo Park, and Leeds' Kaiser Chiefs, whose own Saturday night single "I Predict A Riot" is the Monkeys' only serious rival for record of the year. You can throw in the chip-shop romance of The Streets too (Turner sees his style "on a tightrope between [The Streets'] Mike Skinner and Jarvis Cocker"). In a new century supposedly defined by globalisation, 2005 has seen British pop return to its natural home of provincial mundanity and private hopes, small specific moments of ignominy and transcendence, in a line that runs from Billy Liar and The Beatles to punk and Parklife.

This is heartening in itself, and not at all how the odious likes of Simon Cowell had our pop future planned. But these bands' relationships with the fans who have given them success is an even greater cause for optimism. It's a bond which began with The Libertines. Before Pete Doherty was half-destroyed by crack and press disgrace, his old band planted the seeds for everything that's happening now. While the previous generation of Britpop bands, led by Oasis, had either expired or become as bloated as U2 by the 21st century's start, The Libertines were idealists who recalled the earliest days of their heroes The Clash.

The tatty but transcendent, Blakean dream-Britain of their songs, which they dubbed "Albion", is echoed in the world-views of the Arctic Monkeys and others. They also broke down the barrier between themselves and their fans, playing gigs back at their flat, forging face-to-face connections utterly alien in spirit to the practices of the majors. This is why so many teenagers feel deeply drawn to guitar music again. It was Libertines fans, too, who began the practice of swapping free music online, developing a community independent of the record industry. The Arctic Monkeys, the legend goes, were first discovered on a Libertines website.

It is on the internet too, of course, that the implications of the Arctic Monkeys' success seem most profound. It appears to invert the music industry's long-held fears of free-music based, web-led meltdown. Instead, internet file-sharing and discussion built a grass-roots movement of fans for the Arctic Monkeys' music. As with the Libertines' face-to-face conversions, new technology was being used for an almost folk-style passing of music. This practice has been institutionalised, and perverted, by Myspace.com, the massive website where individuals, and bands such as the Arctic Monkeys, accumulate faceless, theoretically like-minded "friends", who support and debate their activities. Rupert Murdoch's recent buy-out of the company shows the way this briefly democratic set-up is likely to go.

The implications of such industry-bypassing channels still seem enormous. Most commentators see the Arctic Monkeys' hit as its first aboveground eruption, the main reason their success this year is so crucial. The band themselves, however, beg to differ. In fact, they find the idea appalling.

"The other day," drummer Matt Helders sniffed to US website prefixmag.com, "somebody said to us, 'I saw your profile on Myspace.' I said, 'I don't even know what Myspace is.' [When we went to No 1 in England] we were on the news and radio about how Myspace has helped us. But that's just the perfect example of someone who doesn't know what the fuck they're talking about."

As to the internet, the band only use it "to email or whatever; iTunes, stuff like that." A friend of the technologically crippled group had to build their website. But it was the fans themselves who placed the net at the heart of their story. "It's not like we had a plan," Helders continued. "We used to record demos and just burn them onto CDs and give them away at gigs. Obviously there weren't many demos available so people used to share them on the internet, which was a good way for everyone to hear it. It didn't bother us. And it made the gigs better, because people knew the words and came and sang along."

It was at just such a gig, in Sheffield last Christmas, that the band first realised how their fans had spread their message wider than they had dreamed of doing themselves. "It was the first gig where people we didn't recognise were singing along," Helders said. "We were like, how do you know the words? That was definitely the point where we were wondering, what's happening here ?"

By this spring, the buzz around the band had finally reached industry ears. Some A&R men were turned away from their sold-out gigs at first - having got so far on their own, why let them in for free? Finally, though, with big offers being tabled by the majors, they signed with Domino. Before Franz Ferdinand's equally startling success, this was a label essentially run from owner Lawrence Bell's flat, built on his personal taste.

"We were ready to sign to a different label," Helmers admitted to Drowned in Sound magazine. "I was tempted by the money on offer, because it meant I could give up my day-job. And then Lawrence came to watch us. He seemed like a genuine fan. He decides who he signs, rather than some MD. It all seemed just right, so when the rest of the band met him, we signed to Domino right there."

It recalls how deals were done in the days of the independent labels of the '70s and early '80s. It is why New Order signed to Factory, and The Smiths to Rough Trade. And this, as much as the ultra-modern 'net practices that seem to define them, also suggests why the Arctic Monkeys are such a happy tale with which to end 2005. Along with their best contemporaries, they have returned pop to its oldest, truest roots.

The seismic impact "I Bet You Look Good On the Dancefloor" has had is, after all, remarkable first because it is "just" a single. Once pop's beating heart, when the Beatles and Stones made creative leaps with every hit, the '80s saw the format downgraded to a loss-leader by disinterested major labels, who only cared about the far costlier album.

This has made pop sluggish in the years since, geared as it is to biannual, bloated, 78-minute CDs. But the youth culture the Arctic Monkeys come from thinks differently. Though their debut album, Whatever People Say I Am, That's What I'm Not, will arrive early next year, "I Bet You Look Good On the Dancefloor" is an event in itself. The Kaiser Chiefs, too, though a more mainstream, fame-hungry outfit, have defined this year with the anthemic "I Predict A Riot", far more than by their patchy album debut Employment. Downloading individual tunes for £1 is in just this instant spirit.

Perhaps more surprising, though, is a simultaneous, archaic side to this trend, a world away from "fifty-quid man" (the well-heeled, middle-aged multi-CD purchaser the mainstream industry relies on). Go to any indie store, and you'll find fans leafing through racks of new seven-inch singles, a format thought dead a decade ago, on which the Arctic Monkeys sell well. Just as much as downloading, this suggests a generation of listeners who consume music the way they want to, ignoring corporate commands.

The final way in which the Monkeys stand as a band of 2005 is the most old-fashioned: the gigs. When they played the Astoria, 1200 people exploded in crowd-surfing, pogoing, singing joy, a moment that made bassist Andy Nicholson's nose bleed, from sheer emotional intensity.

Whatever the quality of the bands, there are fans acting with similar abandon all over the country right now, in a statistical boom-time for live rock'n'roll. The music's new fans are using technology, from the internet to texting, to organise seeing it played in the flesh, ferociously.

The Arctic Monkeys' own reaction to the fuss around them has been sensibly cynical. "What's the point in talking ourselves up?" Turner asked recently. "We know we're not the best band in the country." "It can't get any more successful," he also acknowledged to NME. "It can only get bigger." But whether they even exist in a year's time isn't really the point. They have proved rock'n'roll, and its new fans, are in rude health once more. And, perhaps, always will be.

'Whatever People Say I Am, That's What I'm Not' is out on 30 January on Domino Records. The Arctic Monkeys play the NME Awards tour from 24 January