A young girl enters a confusing and frightening new world where every corner might hide something wondrous, or a lurking beasts ready to pounce... One need not be Freud to smell the subtext to this archetypal story.

But Mexican director Guillermo del Toro's Spanish language film "El Laberinto del Fauno", or "Pan's Labyrinth", is so much more. It is also a deeply political film, although the means used to express that message might strike most viewers as unusual.

The film started out as a companion piece to "El Espinazo del Diablo", or "The Devil’s Backbone", del Toro's 2001 ghost story set in an orphanage, and shares the backdrop of late civil war Spain, that relic of the Fascist past, which lingered on 'til the eventual drawn out death of Generalissimo Francisco Franco in 1975. But both films stand perfectly fine on their own.

"Pan's Labyrinth" is a hard film to classify, and a film many will find it hard to watch, if for no other reason than that it will confound the expectation of many in the audience. A war film, a meditation on the totalitarian impulse and the worth of human imagination, and a fantasy fairy tale, it is all, and none, of the above.

film-makers, and the audiences they cater to, have traditionally preferred their fantasy fare clearly demarcated from gritty realism, and the former unconnected to the latter by anything other than vague allegory.

It is probably inevitable that "Pan's Labyrinth" will be compared, if for no other reason than the name, unfavourably by some whose expectations are confounded, to an earlier film, Jim Henson's 1986 film "Labyrinth", starring Jennifer Connelly as a modern day Alice and David Bowie as the sexy beast in tights at the centre of the maze.

While there are similarities in the themes, viewers will soon discover that the fantasy elements in "Pan's Labyrinth" are not only darker, but are subordinated to the story of a real world, which is darker still.

Yet it is still a fairy tale.

Fairy Tales - It brings to mind the innocence of childhood, magic and laughter. But then we remember that in fact we weren't that innocent even as children. And when we, many years later, actually re-read those fairy tales, or read them aloud to our own children, we discover, almost embarrassed, that they aren't as hippie happy as we'd imagined them to be. Some of them are down right nasty. There's children chopped up and eaten, there's headless bodies on display and heads on pikes; and that's even after they were white washed.

When fairy tales were still a living tradition, orally transmitted, and folklorists, like the brothers Grimm in Germany, trudged about the countryside in the early 19th century writing them down, they weren't meant for children as such. These were yarns told for the whole family. And some of them were shock full of gratuitous torture, tits 'n ass.

When the Norwegian folklorist Peder Asbjørnsen's original notes were found as late as the late 1970s, it was discovered that a substantial number of stories had been expurgated from his and Jørgen Moe's Victorian era volume of Norwegian fairy tales (Norwegian text, some of them can be found here in English translations). In addition several stories that were included had been given a thourough scrubbing before publication. Here were stories where the little guy won the princess by virtue of having the biggest... tool. These were subsequently published as "Asbjørnsen & Moe's Erotic Folk Tales".

Likewise the "Arabian Nights" is not for the lilly livered. But it too is best known in Bowdlerised versions where some of the violence and all of the sex is scrubbed out.

Even in these more politically correct versions fairy tales were later attacked by psychologist in the post-war era as harmful to young impressionable minds. Reading Bluebeard to your child was tantamount to abuse. But do we really do children any favours by shielding them from scary and adult concepts? Slate magazine's Maria Tatar isn't so sure.

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Fairy tales once elicited what Richard Wright has described as a "total emotional response." In Black Boy, an autobiography of growing up in the Jim Crow South, Wright evokes the memory of having "Bluebeard and His Seven Wives" (a fairy tale whose implied audience is clearly adults) read to him by a schoolteacher named Ella: "My imagination blazed. The sensations the story aroused in me were never to leave me. … I hungered for the sharp, frightening, breathtaking, almost painful excitement that the story had given me." Like so many young fairy-tale protagonists, Wright found himself experiencing a shudder of pleasure and fear, standing "at the gateway to a forbidden and enchanting land." And it was literally forbidden: Ella, who was boarding at his house, sneaked the story in, but this was long before Bettelheim had enlightened Americans about the therapeutic power of fairy tales to strengthen young superegos. For Wright, the maturational effect was a sound beating (Wright's grandmother denounced the tale as "devil's work") and a lifelong engagement with stories, whose power to change us—not least by frightening us into imagining alternate realities—had once overwhelmed him. Wright's experience gives us pause about our endless efforts to invent child-friendly fairy tales. Were our ancestors on to something when they included children in their communal storytelling practices?

It is this older fairy tale tradition del Toro harks back to. Older is also a word that cuts to the core of the film

While his 1993 breakthrough vampire tale "Cronos" was deeply imbued with a palpable Catholic Christian sensibility, in "Pan's Labyrinth" there is no black and white, other than for those who would order the world according to their rigid understanding of it, and no heaven, only the underworld of ancient pagan myths and legends.

The film begins with the story of how the daughter of the king of the underworld longed to see the world of living men and ran away, herself to become mortal and suffer the death of all mortal things, but that one day she would be reborn.

The year is 1944, and Carmen (Ariadna Gil) and her daughter Ofelia (Ivana Baquero) are on their way to a rural military outpost commanded by Carmen's new husband, Capt. Vidal (Sergi López), who is tasked with running to ground the last guerrilla hold-outs against the new Falangist regime hiding in the mountains.

Despite the toll the trip has taken on his pregnant wife, they have been called out to the old mill that serves as his headquarters, because he is adamant that his son, and a son it must be, be by his side when he is born. Among the gears and cogs of the old mill, this clockwork orange of a man spreads terror in the local populace, while trying to force the world to march to the beat of his rigid ideological outlook on life.

But the countryside is also home to remains of far older inhabitants. While stopping by the wayside Ofelia comes across a strange ancient looking idol. She's a girl who, though she's told she's getting too old to read such things by her mother, who has made the kinds of compromises with life that Ofelia is still unwilling to make, finds refuge from the world around her in her books of fairy tales. And the stick like flying insect which emerges from the mouth of the idol, far from revolting her, sparks off her imagination.

Upon their arrival it's obvious that her stepfather has little interest in her. And her increasingly ill mother, who is cared for by the local doctor (Álex Angulo), doesn't have the strength to look after her. It falls to the captain's chief housekeeper, Mercedes (Maribel Verdú) to take care of the girl as best she can. While living under the same roof as the Capt. Vidal, the commander of the government forces, Mercedes, and the doctor are clandestinely aiding the rebels in the forest, supplying them with information and medical supplies. So the girl is mostly left to her own devices, and her own imagination.

One night the peculiar insect reappears, only this time it turns into a fairy, which lead her through the crumbling stone labyrinth on the grounds, where she meets a faun (Doug Jones, who also plays the ghastly Pale Man, a creature with eyes in its palms, who guards a magic blade and sets upon anyone foolish enough to help themselves to any morsels from the sumptuous feast in his lair), but hardly the sweet creature of Art Nouveau picture post cards, who tells her that she is in fact the reborn princess Moanna of the underworld. But she must accomplish three task before the full moon (her first menstruation?) to prove her claim before she can return to her true home.

Ofelia believes this representative of the chaotic forces of nature. But unlike Capt. Vidal, whose worldview encompasses only orders, those who obey them, and those who do not, and must therefore be crushed, she does not obey blindly, both for good and ill.

The film weaves these two story lines together with such deftness, that one hardly stops to consider what an unholy mess of clashing styles it might have devolved to in less skilled hands.

There are layers of heavy symbolism, as when Ofelia has to strip off the constricting dress of a more "civilised" age, made for her by her mother, to crawl into the dirty, slimy roots of the disconcertingly female genital-shaped fig tree to retrieve the magic key swallowed by the King Toad which lurks below. And despite leaving the dress, reminiscent of a slightly more mature, and darker version of Alice's dress in "Alice in Wonderland" and "Through the Looking-Glass" by Lewis Carroll, behind, it still ends up soiled.

There are also themes of blood sacrifice and rites of passage. But remarkably none of it ever seems contrived or less than organic. It is testament to an artist at the heights of his powers that del Toro manages to pull it off.

It is magical, not in the cute parlour trick sense of the word, but in a much deeper and more primeval, even pre-religious, way. It is also one of the best pictures of the year.

The film is not without its flaws. For example, even though Sergi López goes at the role with consummate skill, Capt. Vidal is too much of one-dimensional fairy tale villain for the real life human being he is supposed to be. The theme of his father's watch could have been expanded upon to give his character, if not a sympathetic one, then at least a tragic quality, which alas is largely missing.

But such flaws as there are do not change the verdict that "Pan's Labyrinth" is one of the most fascinating, disturbing and poignant films to be released in quite a while. If that translates into box-office success is another matter entirely.

Though it should be a safe bet for the short-list for Best Foreign Language Film, it is a bit hard to imagine the somewhat conservative, generally older voting members of the Academy getting past the dark fantasy elements and awarding it an Oscar (neither horror, nor fantasy, has traditionally been Academy favourites). But if it were to happen, it would not be undeserved, neither would one or two in the main categories.