To its evangelists it offers an internet for the masses, already representing 1.5 million email registrations in the UK alone. To the money men it offers the holy grail of electronic commerce that will outstrip the web within five years. But to its critics it is little more than a dumbed-down, stripped-out web. So who is right? Just what is interactive TV?

The prospect of multi-channel television with limited interactivity has been the goal of satellite broadcasters, telecommunications giants and hardware manufacturers for nearly 50 years. And although interactive TV is now, finally, finding a place in our living rooms, there is confusion over what it actually is and does. Even people in the industry usually hedge with a swift "can I get back to you?"

In a nutshell, interactive TV comprises four different kinds of service converging through the set top box. First, there are enhanced TV services such as Sky Sports Active, or ITN's interactive news channel. Then there is limited web browsing, followed by restricted interactive shopping spaces and, finally, teletext. In the UK these services are available through five major operators; BSkyB, NTL, ONdigital, Telewest and Homechoice.

For many, combining the once separate technologies of television, telephone and internet means reaching the kind of mass audience that the PC alone might never achieve. According to NetValue, PCs are now in 30.8% of UK homes (mostly with modems). That means almost 70% of UK homes are with out them. Even in the US, where PC penetration has reached more than 50%, that still leaves a lot of people offline. So can we yet call the net a truly mass medium?

Many of the makers of interactive TV say not. And what's more, they claim that only they have the means to reach the mass market and turn every UK home online. It is worth remembering, they say, that the government plans to switch off analogue television some time between 2006 and 2010. Therefore, interactive TV is likely to end up in almost every home in the UK.

And it is not just in the UK where there are bullish predictions for this medium. IT research company Jupiter Media Metrix says interactive television will now grow faster than the PC internet in the US. In a report published last month, Jupiter predicts adoption will grow by 83% per year, serving 46 million homes by 2005.

And the UK (along with Germany and Sweden) will not be far behind, says Jupiter.

Similarly, another research company, Forrester Research, predicts that interactive television will reach 80 million households worldwide by 2005.

Such optimism is leading forecasters to believe that the value of goods and services bought through interactive television (t-commerce) will exceed the value of internet consumer shopping (e-commerce) within five years.

If correct, there is lots of money to made out there. But with the UK's dot.com revolution currently in turmoil, are we ready to believe that another revolutionary brand of shopping is about to change consumer habits?

BSkyB - by far the leading player in the UK - says it can make money through a mix of subscription revenues, betting and coaxing viewers to buy other goods and services through their TV. It anticipates that by 2005 it will be able to squeeze an average of £400 a viewer a year through each set top box. Its interactive movie service, Sky Movies Active, to be launched in June, will earn a commission from each cinema ticket and a slice of the revenue from each phone call.

Jim Rutter, BSkyB's director of interactive broadcasting, says: "What we are trying to do with interactive TV is to bring in some of the web's best qualities and put them into the set top box. But we are being quite selective about what we put up there. It is not open internet access."

To do this, BSkyB has developed its own mini-browser that allows you to watch TV and search a limited number of websites at the same time. The graphics are basic, but for simple information, such as UK phone numbers, the new service is fairly fast and reliable.

So does that make interactive TV the internet? Well, you cannot access news groups, or upload content to the net through the set top box. Also, a PC screen has many more pixels per inch than a television and the images are much better defined. Unless you have eyes like a hawk, surfing the web from the comfort of the settee is very difficult. Only a few websites - among them the Guardian - offer specially configured web pages for the TV.

But interactive TV is more than just a stripped-out web. Interactive spaces with a different look have also been created. These so-called walled gardens are more a blend of teletext with accompanying TV pictures and music than websites. Navigation is basic via a remote control. But you can still access your bank details, arrange insurance and - crucially - send email.

Paul Cackett works for EC1 Media, a young company which specialises in interactive TV. He says there are similarities between walled gardens and the big portals on the web and ISPs (internet service providers) such as AOL, MSN and Freeserve.

"Surfers are becoming used to selected content," he says. "This means that advertisers are finding new ways of getting their message across. If nobody is watching conventional TV and conventional adverts, brands are having to look at new ways of doing things."

What this means is lots of retailer-supported television channels - "brandcasting". Carlton has already joined forces with Sainsbury to create Taste, an interactive food channel. Last month, Granada and Boots launched the Wellbeing Network - a health channel with a programming budget of £10m a year. But if this is the future of the internet and television combined, isn't it a bit mundane?

"At the moment in the UK marketplace, the majority of interactive content isn't related to TV content," says Joe Parkinson of NTL. "We are still trying to keep things simple for the viewer and work out what they like and don't like."

Still, there is a lot of confu sion in the market. Despite all the bold predictions, the interactive television industry is looking shaky. Two of its major players, Razorfish and Two Way TV, recently laid off staff. And consumers are not yet taking to interactive TV as quickly as many would like.

But many of the operators insist that it is still a young medium. With massive space and the versatility of the different media, the potential is bound to take years to assess.

For some, the coming of interactive TV might spell the end of an era when the internet meant being able to go wherever you wanted. But to others, what really counts is reaching out to the millions who remain offline.