Being the victim of a prank can prompt a variety of reactions, from tolerant amusement to outright anger. Most of us dislike being deceived, but to be completely and successfully hoodwinked into believing that something is true and then be told it's not can actually be humiliating. The more you believe in what you are told, the more extreme your reaction to being fooled is likely to be. Thus when landscape artists Doug Bower and Dave Chorley revealed that the crop circles that had been appearing all over the southern counties were made not by visitors from other planets but by the two of them with a pole, a rope, a board and a few beers, many of those who had effectively built their own ludicrous religion around these seemingly mysterious apparitions simply dismissed this and continued to believe that at least a sizeable number were made by flying saucers. A couple of years back some enterprising English farmers even developed a nice sideline arranging tours of crop circles that had appeared on their land for American tourists who were daft enough to take M. Night Shayamalan's ridiculous Signs seriously.

On 31st October 1995, a documentary was aired on New Zealand television that proved something of a revelation. It was sparked by the discovery of a chest full of film cans by noted Kiwi film-maker Peter Jackson (yes, he of Bad Taste, Braindead, Heavenly Creatures and The Lord of the Rings) in a shed located in the garden of the house of an elderly neighbour, film that has been shot early in the 20th century by an until then virtually unknown film-maker named Colin McKenzie. At a time when the world was celebrating 100 years of cinema and the good people of New Zealand were being asked to search their attics and cellars for films that would shed more light on the country's own cinematic past, this was exciting stuff. McKenzie was a genuine innovator, building and mechanising his own movie cameras, creating his own film emulsion and colour stock, almost accidentally inventing the tracking shot and the close-up, and even delivering evidence that local inventor and aviator Richard Peace was ahead of the Wright Brothers in the realms of manned flight. McKenzie had even supplied his own sober epitaph – as a war cameraman, he had laid down his camera to help and injured man and unknowingly filmed his own death. But the most extraordinary discovery was his epic feature Salome – the first film that truly deserved that classification – which was uncovered when the programme's co-directors Peter Jackson and Costa Botes mounted an expedition into the New Zealand bush to search for the remains of the film's extraordinary sets.

Astonishing stuff. Except none of it was true. Jackson and Botes had hoodwinked much of the viewing public into believing what they dearly wanted to believe. They were aided in their quest by the authenticity of their footage, the programme's convincing documentary style, sincere interviews with established industry figures such as critic Leonard Maltin, actor Sam Neill and Miramax boss Harvey Weinstein (who cheerfully announces that he will be cutting an hour from Salome for its US distribution), and an accompanying article run in the respected weekly current affairs magazine The New Zealand Listener. When the hoax was revealed, the reaction was largely one of anger at having been so effectively hoodwinked, several complainants announcing that they would never trust a television documentary again.

Which is fair enough, if you think about it. We believe what we see in a documentary not because it re-enforces information already known to us, but because we implicitly trust the genre as factual. Its codes and conventions mean that a documentary work is instantly distinguishable from a fictional one, and when the style is used to present fiction in a documentary way it is usually done in comedic fashion, making alert viewers aware that the genre is in fact being sent up, as in Rob Reiner's landmark mockumentary This is Spinal Tap. Without these comic indicators, however, all we are left with to distinguish between fact and fiction is common sense, and there are two problems here: a) fact can be notoriously stranger than fiction; and b) modern society is so overloaded with ridiculous bullshit that a fair proportion of any audience for any fake documentary will swallow it without question, in much the same way they do the fabricated or ludicrously exaggerated twaddle in tabloid newspapers. Thus the BBC were able in 1957 to sell the idea of spaghetti trees as an April Fool joke, and in 1977 Anglia Television screened Alternative 3 (the very film that influenced Botes to kick this project off in the first place), which convinced its audience that personnel involved in a British space mission had mysteriously vanished from their homes. Then in 1992, a BBC production titled Ghost Watch was able to convince its audience that they were watching live coverage of a poltergeist at work in an ordinary suburban home. The BBC banned outright The War Game (1965), Peter Watkins' devastating look at the effects of nuclear war, on the basis that it was propagandist, but it seems more likely that it was the sometimes frighteningly realistic documentary-like approach that really rattled the corporation's executives. After all, look what happened back in 1938 when Orson Welles presented War of the Worlds as a radio news broadcast...

Forgotten Silver uses all the tricks of documentary – old photographs, archive film footage, expert and witness interviews, newspaper clippings, evidential documentation, museum exhibits, a soberly delivered and authoritative voice-over, vérité footage of Jackson and his team in search of the Salome sets, and footage of the reconstructed film's premiere – to mount a largely convincing portrait of an extraordinary historical figure. But to anyone with even a small knowledge of the development of cinema, the clues are not so much scattered about as hurled at you, and many of them are outrageous enough to provoke outright laughter: McKenzie's traction-engine powered camera; the newspaper headline 'Two Men Arrested: Smut Charges Brought' after his first colour film test included shots of bare breasted native girls; the Russian Cultural Attaché named Alexandra Nevsky; the idea that McKenzie invented the tracking shot because his first mechanical camera was powered by and mounted on a bicycle, and that he did likewise with the close-up because he was infatuated with the lead actress and just kept moving the camera closer to her; the world's first example of candid camera through MacKenzie's work with the terrible silent comedian Stan the Man; and Leonard Maltin's hilariously straight-faced suggestion that Stan's on-camera police beating foreshadowed the Rodney King tape by 60 years; the utterly ludicrous digital enhancement that reveals the date on a newspaper in a key piece of archive footage.... the list goes on.

The ideal way to come at any such work would be with no foreknowledge of the trick that is being played on you, but October 1995 has come and gone and the film has become famous precisely because of its mockumentary status. The principal pleasure of Forgotten Silver thus comes from knowing exactly what Jackson and Botes are doing and marveling at the skill with which the fakery is executed, from the authentically lit and faded archive photos to the recreation of a variety of old film footage, complete with the sort of flicker and damage you'd expect to find on film rescued from decades of neglect and shabby storage. Every sincerely delivered line, cheerily enthusiastic interview and increasingly outrageous claim becomes irresistibly funny, with even the more somber moments, such as McKenzie's self-filmed demise, raising a knowing smile because of the skill with which the particular cinematic style is parodied.

Forgotten Silver is a gem, a mockumentary executed with real invention, considerable technical aplomb and a mischievous sense of humour. Crucially, though it has considerable fun with its subject, it never sets out to mock it, openly celebrating both early cinema and the enthusiasm and inventiveness of its pioneers. Most of all, though, despite the very hard work involved in its creation and the very small budget that the film-makers were working with, Jackson and Botes are clearly having the time of their lives, and irresistibly bring to mind Orson Welles' claim that film-making is "the biggest electric train set a boy ever had."

Although apparently shot on 35mm, the picture here exhibits a sometimes considerable amount of grain, but where elsewhere this might be a source of complaint, here it genuinely adds to experience, as it effectively distances the film from the pin-sharp sheen of a Hollywood product and looks very much the low budget, shot-on-the-fly documentary it claims to be. Of course, this description refers to the supposedly 'new' footage (interviews, Jackson, Botes and their team in search of the Salome sets) – the rest consists of a combination of real and fake archive footage and photographs, some of which which have been deliberately aged and damaged. Given all this, Anchor Bay have done a solid job on the transfer – framed at 1.66:1 and anamorphically enhanced, the contrast is strong, black levels very solid, and the colour, though muted in places, is just right for the material. A very slight flicker is visible occasionally, but this may well have been deliberate. Given its minute budget and deliberately low-rent feel, this is a good as you'd expect the film to look.

The Dolby 2.0 stereo soundtrack is often centre-weighted, but many of the sound effects and some of the music is spread effectively across the front speakers. The clarity of the mix is admirable, and the base notes of Plan 9's subtly parodic score are very sturdily reproduced.

The are two absolutely essential extras included here that make this disk worth buying for any fan of the film. The first is the documentary Behind the Bull: Forgotten Silver (21:52) which, despite its brief running time is packed with information about the making of the film. It features interviews with Jackson, Botes and their collaborators, as well as public reaction to the first screening and a priceless look at how some of the faked footage looked before the ageing effects were applied. Of particular note is the staging of Richard Pearce's first flight, a combination of models and blue screen work that would easily have been recognised as such were it not for the battered condition of the final footage. Equally eye-opening is the creation of the ruins of the Salome sets, which was achieved by piling trees and greenery onto the steps of the National War Memorial, which is situated right next to a main road. This is a terrific and tightly packed extra that really gives a sense of both the work involved in creating the film, and the fun that was had by those involved. This extra is presented 4:3 but, somewhat mysteriously, anamorphically encoded.

Secondly there is a Feature Commentary by co-director Costa Botes. Despite intermittent (but thankfully short) gaps, this is again fairly loaded with detail. Even when pointing out the obvious, Botes' deadpan delivery is entertaining, as with his description of Jackson in the opening scene "leading people up the garden path, quite literally," or when commenting on the interviews with himself, Johnny Morris (playing a film archivist), Harvey Weinstein and Leonard Maltin: "Here I am telling lies. Johnny's telling more lies. Now we get to someone semi-famous telling even bigger lies. Now here's someone really famous, and when he tells a lie people tend to sit up and listen." There is a little duplication of some material from the documentary, as in establishing the essential truth of much of the Richard Pearce sequence, but for the most part this is all fresh stuff, ranging from the factually interesting – his discovery after the film was complete that the Australian Salvation Army Film Unit had actually made a feature length film in 1906, two years before their fake claim for Colin McKenzie – and the amusingly anecdotal, as with his dismissal of Jackson's suggestion that they interview up-and-coming film-maker Quentin Tarantino for the documentary because he just wasn't that well known.

Also included are a selection of Deleted Scenes (8:52), which though not really adding to the story in any major way (though the interviews detailing Colin's dealings with the Chinese are interesting) are fun to watch, especially the footage of the intrepid film crew on location in the New Zealand bush, pondering on what they may find – knowing what they were up to, just watching them stumble through their improvisations (and in one case try not to laugh) has its own pleasures.

Forgotten Silver is probably Peter Jackson's least widely seen film, which is a huge shame as, along with his first feature Bad Taste, it is the one that most obviously reflects the director's love affair with cinema and the joy he takes in the process of its construction. This is film-making for the sheer fun of it, and Jackson and Botes are masters at conveying that to an audience, at least one that is in on the joke. And lest we, as film enthusiasts who can spot the absurdities at a thousand paces, mock those who were taken in by the film on its first screening, I have an anecdote of my own. Last year, I taught a class in documentary film for 16-20 year-olds who were relatively new to the codes and conventions of the genre, and after several weeks of screening key documentary works and prompting them to shoot and edit some footage of their own, I screened Forgotten Silver for them. I revealed little about the film in advance, just that it told an extraordinary tale and was co-directed by the by now internationally renowned Peter Jackson, the idea being to ask each one of them afterwards at what point they had twigged they were watching a carefully constructed lie. None of them did, and they were genuinely gobsmacked when I told them the truth. I like to think that in spite of the considerable pleasures to be had from the film when you know it's all a fake, Botes and Jackson would draw some pleasure from knowing that their deliciously well-executed jape, given the right audience and set-up, is still capable of being taken at its word.