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At Sensation events, the hipness of the DJ’s playlist comes a firm second to the sheer sense of spectacle.

'A succession of repetitive beats." In 1994, that's how the British government defined the music played at raves, as part of a bill intended to outlaw them. The public was horrified not only by tabloid tales describing orgies of drug-fuelled hedonism, but also by the fodder for the enormous subwoofer speakers rattling homeowners' windows on the weekends: dance music.

Almost two decades later, dance music, to most people, means an abrasive style beloved by the young, and grouped by pretty much everyone under the umbrella term electronic dance music, a.k.a. EDM. If you've ever heard Skrillex – or a trash compactor going to work on a turntable that's playing a disco record at half speed – you've heard the most extreme end of the genre. But EDM's stuttering vocals and aggressively pitch-shifted synths have thoroughly infected the pop charts as well, through such megahits as LMFAO's Party Rock Anthem and PSY's Gangnam Style.

But whatever the dance-music subgenre, music's former enfant terrible has ended up with some unlikely bedfellows. There's Anheuser-Busch InBev, the world's largest beer company, whose Canadian arm is bringing Bud Light Sensation – an eye-popping EDM spectacle – to Toronto this weekend. And there's the governments of Montreal, Quebec and Canada, whose agencies dole out the principal funding for MUTEK, a 13-year-old annual festival of electronic music and digital art whose latest iteration is currently unfolding in Montreal.

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So how did "repetitive beats" go from public menace to respectable endeavour? And alongside beer companies and taxpayers, why did concert promoter SFX pay $97.5-million (U.S.) for 75 per cent of Dutch party-thrower ID&T, the creator of touring multimedia extravaganza Sensation? Has dance music cleaned up its act?

Not yet. But as a new generation puts on its dancing shoes, two factions are vying for its eyes and ears. One is decked out in fireworks and brought to you by the Fortune 500. The other is touting its intellectual cred and art-world respectability.

The rave scene, as older heads knew it in the 1990s, has been replaced by something much larger. Attendance at last year's wholly legal Electric Daisy Carnival (EDC) in Las Vegas reached 300,000 over three nights. And aging ravers couldn't have dreamed of the kind of money now flowing in. Entertainment company Live Nation, for example, is estimated to have spent $50-million for a stake in EDC promoter Insomniac.

Sensation's music strategist Erick Eerdhuizen doesn't even like to use the R-word when describing the parties that he and his co-workers throw at ID&T. "It's basically a big club adventure, not really a rave," he says, pointing to an all-white dress code and superexpensive sets. Indeed, the production values at a Sensation event are more like those at a Cirque de Soleil show or an Olympics opening ceremony than at a DJ gig. The audience, dressed strictly in white, enters an arena decked out with video screens, dancers, flash pots, enormous hydraulic devices moving props – the works. "You look around," says Eerdhuizen, "and you're in this surreal adventure world."

Big dance events have always been marketed on the basis of big-name DJs, who earn their reputations largely for their ability to know what the audience wants to hear, and when. Sensation's radical innovation involves taking the focus off the DJ, and placing it squarely on the night itself. Although Eerdhuizen emphasizes that he books major artists (his headliners include Swedish DJ Eric Prydz, best known for his ubiquitous 2004 single Call On Me), the music you hear at a Sensation show is dominated by remixed pop hits and the syrupy club anthems topping European charts. The relative hipness of the playlist comes second, behind ensuring that a sense of spectacle builds throughout the show.

When booking DJs, Eerdhuizen explains, he's "really looking at, what is their sound, and how does it fit in the night, and not just going for big names, because we don't sell tickets for big names. We sell tickets because we're Sensation." As a former Sensation DJ, he adds, "I was always really proud being part of this thing, because it's so much more than a stage with a table and some CD players."

The headliners at Montreal's MUTEK would doubtless recoil at the notion that DJs are knuckle-dragging morons whose only artistic input is to push "Play." You'd be hard-pressed to find a more sophisticated musician than Moritz Von Oswald. He was part of the Berlin duo Basic Channel, which more or less created minimal techno in the mid-nineties. His more recent output, including Borderland, his new disc with Detroit's Juan Atkins (a key figure in the invention of techno itself), has a searching, improvised, jazz-like quality, perhaps the product of Von Oswald's deep knowledge of experimental music.

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For him, Miles Davis's early-seventies electric period was a huge influence. "On The Corner and his live albums, Agharta and Pangaea – those are just such a step forward in terms of what jazz really meant at that time," Von Oswald says over the telephone, from the back of a Berlin taxi. "It was so progressive and … complete."

Like jazz fans in the 1930s and forties, who eschewed swing bands, the purists who loathe EDM see it as puerile. But if the EDM scene's rising commercial tide coerces more young people into seeing dance music in general as part of their lifestyle – particularly in North America – the diehards at a festival like MUTEK might find more and more Sensation-goers taking an interest. If the EDM-dominated mainstream and the underground can coexist without irreparably fracturing the dance audience, younger artists such as Jon Hopkins would be the main beneficiaries.

The London-based musician, who has worked on albums by Coldplay and Brian Eno, has plenty of serious-music cred. His spectacular new album Immunity wouldn't sound out of place on dance floors, yet it's likely still too cerebral to land him on lucrative bills like a Sensation event or a big American EDM festival. Still, his attitude toward the new trend is live-and-let-live – with reservations.

"Certainly other tracks sound quiet next to [EDM hits]," he says. "And younger kids who've never been exposed to anything else outside that world might find anything else incredibly boring and too subtle to listen to – and that could be a dangerous thing."

Still, he respects the technical skill of EDM producers. "I wouldn't have a clue how to make bass sounds that ridiculous," he concedes. "I kind of admire it."

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EDM's high-culture roots

One of the 20th century's most prominent composers, Germany's Stockhausen came up with "moment form": Rather than work in a linear fashion toward a climax, the musical environment was freed from the tyranny of structure.

Miles Davis

Along with pioneering the use of electronics in jazz, Davis's 1970s album On The Corner was indebted equally to funk and Stockhausen – a fusion that inspired generations of hip-hop and dance artists.

Andy Warhol

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The pixie-ish fine-art icon's Exploding Plastic Inevitable events – combinations of loft parties, love-ins, performance-art gigs and concerts for the Velvet Underground – set the standard for mixing high concepts with hard partying.

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