Talk about strange bedfellows.

A German publisher of games and children's software, without a major hit to its name and with no experience in online gaming, committing tens of millions of Euros to the development of what it hopes will be a triple-A MMO. An American author of doorstop science-fiction and fantasy novels seeing his work adapted for the first time. A bunch of talented, dispossessed Australian developers, striking out in a new field and a new country, with a truly international team. A wealthy Asian city-state looking to compete with its neighbours and foster an entertainment industry of its own.

If all that doesn't sound out-there enough, wait till you get a load of the game they're making. This is no World of Questhammer: The Rune Crusade. Otherland - from the books by Tad Williams - is a mind-bending concept. For want of a better soundbite, let's call it the first cyberpunk MMO: a virtual world about virtual worlds, in which your avatar is an avatar, the NPCs play NPCs, and you explore a multiverse in which you might be in realistic historical surroundings one minute, and cartoon fantasy ones the next. Everything changes, even your own appearance, and nothing is even pretending to be real.

In a field as formulaic as videogames, you seldom come across anything as unlikely as this. And yet here we are in baking, steamy Singapore, the guests of dtp Entertainment (the publisher) and its new Singaporean outpost, the development studio Real U, formed around a core of ex-Melbourne House talent. You remember them: 8-bit heroes of The Hobbit and The Way of the Exploding Fist, and then cult classic Shadowrun, who in later years struggled valiantly with the tide of licences and conversions heaped on them by Atari, sometimes triumphing against the odds (as in PS2 Transformers).

Even the impossibly garrulous author Tad Williams is here, bulldozing through the jetlag on raw enthusiasm alone, talking enough to fill the thousand pages of one of his books. It's rare enough to get the reluctant presence of a licensor, but Williams seems genuinely delighted to be here promoting this game - and after all, why shouldn't he? It's not just that his work is being faithfully adapted - it's that his predictions are coming true.

The aesthetic of Lambda Mall is weirdly dated - a very 90s version of VR - but the graphical performance isn't.

Otherland depicts a near-future world where the net rules all, and virtual-reality headsets that turn it into a surround sensory experience are commonplace. Everything from shopping to games has become an all-consuming alternate reality played out by humans ("Citizens", inhabiting their "sim" avatars) and computer-controlled AIs called Puppets.

In this world, the ultimate status symbols and playthings of the super-rich are their own personal virtual realities, tailored to their interests and specifications. But these come at a human cost. Without giving too much of the books' plot away, a sinister secret cabal of net overlords is feeding on the consciousnesses of innocent humans, trapping them in virtual space to make their personal fantasies that little bit more real.

You start the game as one of those consciousnesses in a place called the Land of the Lost, a nightmare scenario which you're trying to escape. You'll run, be killed, and reborn in a "baby" state as a simple, low-rent sim (though we suspect the game won't be using that term, for obvious reasons) - a blank, featureless avatar that can be male, female or even neither.

Flight tubes shoot you between sections of the Mall and other virtual realities.

As you increase in power, you learn to manipulate the appearance and properties of yourself and the world around you, and you learn to work with the "code" that underlies and defines everything in the Otherland multiverse (well, it's one hell of a rationale for levelling up). Only then will you be able to take on a more defined appearance, and this could blend you in with your surroundings, or express your wildest imaginings.

On rebirth, you'll arrive in what Real U calls "a chunk of real estate", a virtual space that becomes your own and that you'll return to in order to rebuild yourself - from scratch, but via shortcuts - every time you "die" in Otherland. This is connected to the game's hub, a neon-edged, Bladerunner-style virtual shopping and entertainment complex called Lambda Mall.