Since last Thursday, and until 5pm tonight, more than 100 of the world's major contemporary art galleries have set up shop in a huge tent designed by architect David Adjaye in Regent's Park. Row after row of stands are occupied by galleries from New York and LA, Berlin, Paris, Antwerp, Moscow and Mexico City. All showing their hot new finds and blue-chip artists, their next big things and star names. This, with over 1,000 works, is the first Frieze Art Fair. The best British galleries are here, too, from the long established to the Hoxton groovies, from artist-run Glasgow galleries to East End cult spaces.  On a map of London's galleries given away at the fair, I counted over 60 venues showing contemporary art. Most survive on a wing and a prayer. Modern art in this country, which has finally got over the embarrassing hype of Cool Britannia and the overheated concentration on the YBA generation, has everything going for it, except enough people to buy it.  The biggest problem for British art is that there are so few collectors here. Artists may have vocations, but they need careers too. British artists have to show and sell abroad, to catch the eye of international curators, appear in survey shows and biennales, and wind up in those prestigious private collections whose owners, not infrequently, are also trustees and benefactors of art foundations and big museums. Selling to the right collector is as important as showing with the right gallery. It is a mysterious, chancy business. Where Britain has only one Charles Saatchi, Europe and America have lots of people who collect, consistently and on a grand scale. Some even have an eye.  I always used to encourage art students to visit one of the big international art fairs. It is the equivalent of toilet training: you need to see where your shit goes. Fairs make art almost too accessible, and at the same time no art ever looks quite so vulnerable as it does at a fair, crammed onto a stand with wobbly walls in the souk. There's none of the sheen of the gallery space, none of the aura that good lighting, space and an air of exclusivity lend. Art's material presence and meaning is almost entirely dependent on context. At an art fair, everything is reduced to the level of commodity. Fairs may be slightly grotesque, but they are also, in their way, fun.  The Frieze Art Fair is more fun, and more serious, than any art fair held in Britain that I can remember. The selling that has been going on may have almost all been in euros and dollars, to collectors based abroad, but the public has been coming too, prepared to queue for an hour or so, and pay for a £10 ticket. Walking round the fair, one can be forgiven for thinking it is a mess, that this season's art all looks pretty horrible, that there's no way of telling good from bad. What about that stupid knitted update of a Joseph Albers painting? Or the stand, showing the work of American painter Karen Kilimnik, decked out like a tacky stage set of an 18th-century drawing room, replete with fireplace, escritoires and chandeliers? Or the German gallery stand with the sculpture-in-progress made from black bin-liner plastic and firewood. The guy at the desk hasn't got a laptop, but he has got a saw.  Leipzig painter Neo Rauch is still big this season, I see, and New York- based Swiss painter Ugo Rondinone must be hot property - he's represented here by six different galleries in as many countries. And what of the Japanese artist's photos of herself having simulated, digitalised doggy sex (at least, I think they're simulated)? There is avenue after avenue of stuff, things to make your eyes pop, things to make your wallet wince. How about a Hockney? Or a big white marble slab, obsessively carved into a relief of a Los Angeles highway junction, with dinky trees and suburban houses, feeder roads and exit ramps. You can't have this work, by Yutaka Sone, because its been acquired by the Tate.  If you need a breather, there's a grassy ramp you can roll down, and a room containing a gurgling, cut-glass fountain which, a framed certificate tells us, is dosed with a homeopathically minuscule quantity of LSD. Of course there's no acid, but the idea's the thing. Don't fall over the Sol LeWitt cubes, don't sit on the Miroslaw Balka bench, don't kick that brick, it is very expensive. Don't take offence at Erik van Lieshout's video installation. Or perhaps do. Van Lieshout, whose video at the Dutch pavilion at the Venice Biennale was a huge hit, has made a new one with his aptly named brother Bart. The two argue, hug trees, and do various unseemly things in the Dutch countryside, amidst a local community of mentally and physically disabled people who also appear in the work. "Challenging" and "offensive" don't seem quite the right words for this, which is shown in a foam-rubber lined, mock-up space capsule. It is horrible and wonderful and I watched it twice.  Paula Pivi's ramp, Klaus Weber's Public Fountain LSD Hall and Van Lieshout's work are among the specially commissioned projects that punctuate the commercial stands at the fair. On Friday evening I also watched the ramshackle, knockabout Viennese performance group Gelatin. Their show opened with a human birthday cake involving three naked men who had flickering candles ensconced in their bottoms. There was more, and much much worse to come, but luckily only on video, until a live performer managed the technically demanding feat of doing a wee-wee in his own mouth. This won much applause.  Seated behind me, an Austrian lady, who could well have been the performer's auntie, chortled contentedly throughout. My own appearance on the same stage, in yesterday's panel discussion about criticism, was somewhat less spectacular.  Off-site, Jarvis Cocker made a debut performance with his new band; Canadian artist and singer Rodney Graham did a gig, there were DJ nights, VIP champagne breakfasts and gallery street parties. Most London galleries have timed new shows to open over the past few days. Even allowing for spin and the usual disinformation, the galleries have been doing good trade, even in comparison to the world's other art fairs.  There is a palpable sense of excitement and relief in the air. London's previous contemporary art fairs have neither attracted the heavy-hitting foreign galleries, nor the world's major art collectors. Perhaps no one bothered to invite them. London has for years held contemporary art fairs, but on an international scale they have all been hopelessly parochial, head-in-the-sand non-events, lacking both quality control and any sense of occasion. Until this week.  The Frieze Art Fair is the brainchild of Matthew Slotover and Amanda Sharp, publishers and founders of frieze magazine, for which I occasionally write (my Guardian colleague Jonathan Jones is also a contributor). The fair is more than good for business. It is a sort of affirmation. When I compare the situation here with even 10 years ago, in terms of the possibilities available to young artists and the public reception of new art, I might as well be living in an entirely different country, another culture. Of course there is a lot of new art that's silly and forgettable, but there is also much that will stick around, and get better, so long as it doesn't die of market neglect.  One memory I will take away from the fair is a group of works which I'm not completely certain exist, at a stand for a gallery which might not be real either. The Wrong Gallery is an empty cubicle at the fair, corresponding to a fake door that leads nowhere on 20th Street, New York. Inside the cubicle are a boy and a girl, both about eight years old. They chant, they twirl about, they run to the far wall, shout "What do you think this is about?" and pretend they are dealers, inviting us into the gallery. "We are only documenting works which are not installed at the fair," they explain.  After each bit of perfectly choreographed business, they sing the titles and the prices. "This is an edition of six," they sing. "It is 6,000 dollars or 8,500 euros." If anyone tries to photograph the kids, they fall to the floor and yell: "We don't think it is appropriate to take pictures of our work!" The all-day, every-day event, by several pairs of precocious youngsters, is both winning and very sly. The artist behind it is called Tino Sehgal. I'd buy one of his pieces, except they want cash and I'm not quite sure what I'd be getting. I do not wish to buy a child, however talented. It's tough being a collector.  · Frieze Art Fair runs until 5pm today. Details: 020-7692 0000.
The Frieze Art Fair offers all things to all people. But most of all, says  Adrian Searle, it brings fun, excitement and money to the capital.