"What is a ghost?" asks the voice-over that opens Guillermo del Toro's masterful third feature, providing a clear indication of the director's intentions. He's laying his cards on the table, or at least one of them. There is no "could this place be haunted?" about this film – we catch our first glimpse of the ghost five minutes in and about half-an-hour later get to see it up close. This, clearly, is not going to be a standard ghost story. Indeed, it is something else entirely.

In the final days of the Spanish civil war, young orphaned Carlos is taken to a remote orphanage that has become a refuge for the children of Republicans who have died fighting the fascists. Here he encounters the kindly Dr. Cesares, the matronly Carmen, the brutal Jacinto, and the beautiful Concita. This small community is crumbling as the fascists approach and the guardians struggle to feed the children, despite holding gold that helps fund the revolution. The courtyard is dominated by a huge unexploded but supposedly disarmed bomb, whose arrival was marked by two events – the disappearance of a young boy named Santi and the arrival of "the one who sighs," a ghostly presence that most choose to deny the existence of. Carlos, on the other hand, becomes curious about the apparition, especially when it attempts to communicate with him directly.

On the surface this could be seen as part of the recent wave of intelligent, low key, non-referential supernatural films such as The Sixth Sense, Ringu and The Others; indeed, comparisons with The Others were frequent on its release, but this seems to be curiously based more on the south-of-the-border nationalities of the films' directors than their content and approach. Alejandro Amenábar's film oozed atmosphere and was developed as a straight-up ghost story, with the emphasis always on the supernatural element and how it was affecting the main characters. In del Toro's film, the ghost, although very real, is a more symbolic character and a component of the narrative rather than the force that drives it.

Horror has a fine history of exploring political issues through subtext, but it's rare to see the politics as up front as they are here. Guillermo del Toro and co-writers Antonio Trashorras and David Muñoz have chosen a key period of Spanish history in which to set their tale, a time of great political and social upheaval during which the whole country was torn apart, an aspect that gives the characters much of their depth and the narrative its drive and bite. Most horror tales are developed by isolating the main characters from the outside world in some way – Alien effectively did so by stranding them in deep space, Dracula through the the Count's remote castle home – but The Devil's Backbone does so through its politics, with entire families destroyed by the Spanish Civil War and children orphaned when their parents went off to fight for the Republican cause. Locating them in an orphanage in the middle of nowhere makes dramatic sense, as this is not just a place to hide them from the fascists but a location where funding for the cause can be hidden and irregularly dipped into when needed, guarded by wooden-legged Carmen and the learned Dr. Casares. In them one can observe the failing spirit of the revolution, with Casares's timidity over his love for Carmen and her physical handicap poignantly representative of both a failure of ideals against the might of circumstance and the appalling injury and suffering that the war has inflicted.

And then there's the orphanage's caretaker Jacinto, whose unprincipled greed, bitterness at his own past and cruelty to the children is a sign of things to come, when Franco's nationalist soldiers would show neither compassion nor mercy in their post-war execution of an estimated 100,000 Republican prisoners. In the end the children themselves become resourceful Republican soldiers, fashioning primitive weapons to work collectively in a final stand to bring down the brutal symbol of fascism that has destroyed their lives, their home and their friends. It's a potent mix, but the politics also propel the narrative forward, providing character motivation and a background that is reshaping their country's future. This is at its most explicit during a trip Jacinto makes to town to sell his potions, only to bear witness to the execution of captured members of the International Brigade, who include the very man who first brought Carlos to the orphanage. This one incident triggers a series of decisions and events that effectively shape the final act of the film and the fate of all of its key characters.

All of which would suggest that the narrative is dominated by its political elements, but it never is. This is still a ghost story and if the ghost in question is symbolic of war-torn Spain's lost innocence, then it's still a key component of its dramatic structure. The establishment of its existence and identity is not really an issue – both are clearly signposted close to the start of the film – but del Toro still manages to create some tremendously creepy scenes and one heart-stopping shock around the fear of just what is living in the large pool in the kitchen basement. The ghost in particular is very effectively done, his transparent skin, hollowed eyes and the blood flowing upwards from a wound in his head making for a genuinely unnerving apparition, and one you really can understand the frightened Carlos running from.

Utterly convincing performances all round help sell it. Federico Luppi – who worked previously with del Toro on his first genre feature, Cronos (1993) – brings a dignity and authority to the role of Dr. Casares, beautifully conveying his suppressed longing for Carmen with the smallest of looks, but still genuinely intimidating when confronting Jacinto with a shotgun. As Carmen, Marisa Parades is a powerful screen presence, a woman torn between her commitment to the cause and her physical desires, a weakness that she knows full well could be her undoing. Eduardo Noriega is wonderfully cast against type, a romantic hero in a villainous role, something he clearly relishes. This also helps distance the film from the Hollywood structuralist norm, where good guys are pretty and the bad guys are ugly – del Toro knows how it really is. Finally there are the children, all of whom play their roles with the utmost conviction and not the slightest hint of mawkishness or sentimentality. These kids have had it hard, and despite their developing camaraderie have more in common with the street urchins of Buñuel's Los Olvidados than the spoilt brats of oh so many Hollywood tales of lost innocence.

Fine detail enriches the film throughout, in the production design, performances, characters and narrative, often adding to the plot development in seemingly offhand ways. Carlos's treasured comic, for example, leads to an attempted trade with bully Jamie for his crude (and comically inaccurate) drawing of a nude woman, a transaction that provides an insight into Jamie's more vulnerable and creative side. His desire to draw comics later shows itself in a history class on the hunting of mammoths, the resulting artwork directly prefiguring the climactic battle between the boys and their would-be prey. Many other such moments do not even register on the first viewing, only allowing you to connect the dots when you know why, for instance, Carmen complains about her wooden leg at a particular moment in the story. And sometimes almost throwaway lines have a resonance about the attitude of the characters to major issues such as politics or religion in these troubled times – forced to help carry a huge crucifix bearing a larger-than-life size figure of Christ, the frequently goggled Owl remarks, "Shit, for a dead guy he sure weighs a lot."

There is so much that can be written about this film, but the best advice I can give is simply to see it. In the cinema it was compelling, but two DVD viewings later I still hadn't appreciated all of the subtleties of the narrative and the characterisations – a listen to the commentary track revealed a whole new level to many scenes that made a fourth viewing essential, and several have followed since, each revealing something new. In the space of just those early viewings, The Devil's Backbone went from being a thoroughly satisfying, intelligent and unusual cross-genre work to one of my favourite films of recent years.

On this Canadian disk the menus are unflashy but effective, though I do have two bones to pick. The first concerns the initial language selection. The French and English language options are shown, accompanied by atmospheric breathing sounds and what appears to be a light passing over both words. Very nice. Except that your have to look very closely to see how the desired language is actually selected. In fact French is underlined and English can be chosen by selecting Right and Select on the remote control, but the underline is so dark it is almost invisible and has to be carefully located if your eyesight is anything but perfect. Once this is known, it is not a problem.

Next up, though, is an atmospheric intro to the main menu. This is taken from the film itself, which is all well and fine if you've seen it, but if you haven't then be warned – it's the best shock moment from the film and will ruin it for you if this is your first time. Otherwise the menus are well designed and in keeping with the feel of the film, the semi-abstract animated main menu in particular. The Chapter Stops menu includes looped sequences from each of the chapters, which always adds a touch of class.

Framed at 1.85:1 and anamorphically enhanced for widescreen TVs, this is a very impressive transfer. The daylight scenes are striking, with solid colour reproduction and excellent contrast. The darker scenes are equally well transferred, with strong shadow detail ensuring that some subtle effects that were not even obvious in the cinema are clearly visible on the disk. Sharpness is first-rate throughout and no obvious artefacting was visible. The disk also reproduces the chosen colour scheme faithfully, the warm daytime interiors and steely night-time hues are there, but are never over-saturated. A very fine job.

Sound is key to the success of so many of the new breed of non-jokey horror films. Ringu in particular used both silence and noise to often terrifying effect, while the 5.1 track on The Others gave me one of the biggest scares I've ever had in my own home. Though not a straight horror film, The Devil's Backbone still uses sound to create a seriously unnerving atmosphere. In particular when Carlos is disturbed in his bed on the first night, the sound of bare feet running quietly on the stone floor is all the more effective because it happens behind you. This is a strong mix that utilises the full sound stage, but not in an aggressive way, as befits the film. Possibly the most extraordinary 5.1 effect occurs after one character has been almost deafened by an explosion and we get to hear the world as he does – the sound sent out by the subwoofer is at such a pitch that you do not just hear the sound, you feel it. The effect borders on being unpleasant (depending on the volume you are running the film at – loud in my case) but is absolutely right. A very effective use of 5.1. The Dolby 2.0 track also included is well mixed, but vastly inferior in many ways to the 5.1 track – the aforementioned post-explosion noise is not even present here.

There are four. The inevitable trailer is a good one: the original Spanish trailer (with English subtitles), presented 4:3 and in stereo, is very seductive, smartly edited and does its job of selling the film most effectively, as well as capturing a flavour of much of its content and tone, including the non-supernatural elements. As with most trailers, though, it deceives on pace and includes a lot of the more memorable shots, so do not watch this before seeing the film for the first time.

Some of del Toro's storyboards have been included and are presented as a slide show, but are of minor interest on their own – a film to storyboard comparison on a couple of sequences, such as those included on some Criterion disks, would have been more informative on how the film may have changed (or otherwise) from storyboard to final product.

The making-of featurette is in many ways your standard electronic press kit included on many DVDs, but is in Spanish with English subtitles and is almost 20 minutes in length, considerably more than the six to eight minutes we are usually treated to, and includes quite a bit of behind-the-scenes footage. Though less thorough than a straight-up documentary, it is still of real interest and worth a look, after you've seen the film at least.

The final feature is the best one, a feature commentary by director Guillermo del Toro and director of photography Guillermo Navarro. Both men speak fluent English and are clearly good friends and enthusiastic about what del Toro regards as the favourite of his films so far. The result is an information-packed and very lively chat with almost no dead patches (there are about two and they last just a few seconds each). Some of the information offered about the use of camera equipment and filters may not enthrall everyone – though is gold to those of us teaching, studying or making films – but this is just one of the many areas covered in impressive detail. Choosing actors, the development of individual performances, the influences of other films and even The Adventures of Tom Sawyer, problems with sets and matching locations; all these and more are tackled in interesting and often entertaining fashion. Particularly fascinating is the information del Toro provides on the way scenes and shots are structured, prompting a real appreciation of just how intricately constructed this film is, and, as I mentioned before, revealing enough to me to prompt a further viewing to appreciate the film in yet another light. There are some wonderfully lightweight moments as well, including del Toro's use of favourite Homer Simpson expressions during rehearsals, and his criticism of individual digital flies towards the end: "That one is good, I love that one....that one's crap." A very fine commentary and, as del Toro points out, his first. His subsequent efforts on Blade II and Cronos were to prove equally enthralling.

The Devil's Backbone was a film I enjoyed a great deal the first time I saw it, but three screenings later has rocketed in my estimation because I have been better able to appreciate the director's intentions. It is inevitable that you go into your first viewing of a film with certain expectations, especially when you have to prepare the programmes and programme notes for the cinema screenings as I do. Some reviews have compared the film to The Others, but in the end this is unfair, as the two films are very different and del Toro's is genuinely unlike anything else around. It is also very distinctly a non-Hollywood product (and I use that as a compliment) in its structure, its melding of genres, its characterisation and even in its use of music, especially at the end. This is a fine presentation of an excellent movie, a rare thing indeed for a non-English language product on region 1.

As for which version to buy, the choice at the moment is between this Canadian region 1, the US region 1 and the UK region 2. The US region 1 appears to be identical in every respect to this one, the only potential disadvantage being that it has Regional Coding Enhancement, which will render it unplayable on some modified UK players. (It is possible that the Canadian release also has RCE, as my player is not affected by it, but it tends to be used only by major studios and this has been released by a smaller independent label.) The UK region 2 has its modest share of goodies – 3 featurettes, biographies and a trailer, plus the same 5.1 mix as here – but is lacking in two key areas: the picture is not anamorphically enhanced, and there is no commentary track. The region 1 thus has to be the winner, and comes highly recommended.