In the middle of the gig, someone in the front row asks Flaming Lips frontman Wayne Coyne to conduct a marriage proposal. As Damien gets down on his knee to ask Jody, the band accompany the bizarre scenario with synthesised violins. The crowd cheer; Coyne is visibly touched. "Get a grip!" someone laughs.

This is probably a unique event, but then the Flaming Lips were always likely to inspire something special. On record - especially 2000's The Soft Bulletin and the new, even better sci-fi fantasy Yoshimi Battles the Pink Robots, they create a magical environment, a living dreamscape where nothing is quite as it seems and anything seems possible. Live, they multiply this tenfold.

During this remarkable two-hour extravaganza, Coyne performs with a strobe machine attached to his chest, unleashes a clockwork flying dove, smears fake blood down his face and gets a monkey glove puppet to "sing" one of the songs. There are vast silver spheres onstage; films both illustrate the songs and magnify Coyne's expressions. His songs explore the transience of life and escapist power of fantasy. It's like Pink Floyd's early visual extravaganzas crossed with Alice in Wonderland.

People mutter about a "religious experience", and Coyne does have a slightly ecclesiastical air. With his white, blood-smeared suit and Salvador Dali beard, he views the world and the possibilities of pop with childish fascination. You can almost hear his mind whirring: "What if I burst this balloon filled with confetti? What if the bassist dresses as a frog?"

The visuals are backed up by the power of the songs. With Coyne's octave-higher-Neil Young voice, the likes of Superman and the John Barry-ish Feeling Yourself Disintegrate reach new heights of rapture. In a hilarious but awesome masterstroke, Kylie's Can't Get You . . . is transformed into a quasi-religious, orchestral epic. "You might hate this, but we're not making fun of this song," insists Coyne.

It is impossible to criticise an experience that utterly transcends the format of a rock gig. This is a rare occasion of unity between band and crowd, with each party urging the other higher. In any other environment Coyne's ramblings could be schmaltzy, but he can't contain his excitement. To test a theory that the most exciting sound a human can hear is another human, he leads an orgy of mass screaming, which collapses in cheers. Unsurprisingly, Jody says yes.

· The Flaming Lips play the Astoria, London WC2 (020-7404 0400), tonight.