Critics like to talk about the "films of the year", but the awful truth is that this year's most significant movie may well turn out to be a non-movie, a hoax movie, a bigoted piece of poison calculated to inflame the Muslim world. Innocence of Muslims is a 13-minute low-budget video on YouTube, abysmally scripted, acted and directed; it might be risible were it not for the ugly Islamophobia which it promotes and whose effects are now being seen around the world.

It was apparently made by an Egyptian-American based in the greater Los Angeles area, one Nakoula Basseley Nakoula, reportedly a Coptic Christian, who initially claimed to be an Israeli property magnate called Sam Bacile, using funds from "Jewish donors". How Nakoula actually bankrolled this film is not clear. He says his wife's family contributed the money; he himself is a convicted fraudster.

This video is routinely described as a "trailer" and some screenings – of something – do appear to have taken place at one rented Californian cinema, but there is no proof that audiences ever saw anything substantially longer than this, nor that there is anything resembling a "film" of which this is a "trailer". Yet the damage is done. People throughout the Muslim world are being persuaded that there is a proper feature-length entertainment, backed by Jewish donors and being watched by Americans in their movie theatres.

The video appears first to show Christians being attacked and a medical clinic trashed by a Muslim mob in Egypt while the police stand idly by. Here is where – for what it's worth – the bulk of Nakoula's budget appears to have been spent. Then we cut to a crass supposed retelling of the life of the prophet Muhammad. Hammy and preposterous acting is the order of the day, along with crude green-screen staging. People in robes exchange wooden dialogue and gurning threats against backprojected deserts. There is plenty of suspicious cutting and dubbing; crudely Islamophobic lines don't lip-synch with what the actors are mouthing – stuff like: "Muhammad is our messenger and the Koran is our constitution!" It is quite possible that the actors had no idea what they were doing.

But the really sinister thing is that all this ham-fistedness and crassness is an important sense deliberate. It has to look like propaganda for the provocation to be effective.

Innocence of Muslims might prove, in the most nauseatingly ironic way, that cinema still can make a difference. Actually, what it proves is that the movies are still associated with an idea – the idea of America's global power and prestige. If you can produce something hinting at a film proving that this power is being put to Islamophobic uses, you can get an extreme reaction. Heaven knows there are plenty of gung-ho Hollywood movies with Arab villains – respectably produced and distributed – all feeding the disenchantment.

Also, of course, it proves the global reach of the internet. Explosive material can be easily disseminated. Perhaps the most comparable example is Kony2012, the powerful viral video calling for the arrest of Ugandan cult leader Joseph Kony which in March this year exploded uncontrollably in popularity and resulted in its director suffering a temporary emotional breakdown. Innocence of Muslims, a thoroughly nasty piece of work, has caused something worse than this, and was intended to. But like Kony2012, it was almost certainly timed for the American election, in this case to incite Muslim communities and then provoke macho responses from the presidential candidates.

There is naturally a great deal of ultra-dodgy stuff out there on the web, with no gatekeepers to enforce levels of technical competence or ideological good taste. All sorts of murky videos can be accessed. Throughout both east and west, a whole generation is disenchanted with conventional media and looks to the web, with its plethora of user-generated content, for explanations. There are weird conspiracy-theorist movies on the web by "truthers", promoting the idea that the American government faked 9/11 as a pretext to wage war for Middle Eastern oil. Well, crackpot as these theories undoubtedly are, our British and American governments brought them on themselves with their mendacious claims about WMD.

This is what has brought Innocence of Muslims into being. Even discussing it in these terms plays into its authors' hands. Here's hoping Muslim communities can be persuaded to treat it with the contempt it deserves and that the US president and his challenger can keep their nerve.