In her late 20s Ali Smith caught a mystery bug and was laid up in bed for months: the official verdict was chronic fatigue syndrome, which didn't exactly narrow it down. She was a lecturer in English at Strathclyde University, teaching hundreds of students she was encouraged to think of as clients (because they were paying for it), and suddenly one day she couldn't cross the road - the other side was too far away. She couldn't teach, couldn't read, couldn't think. Once she began to recover, her mind was made up: she was never going to make a decent academic, and she wasn't happy in Glasgow. She moved south, and started to write full-time. It was a miserable experience, no doubt about it, but Smith also thinks it saved her life. Virginia Woolf described being ill as a visionary state, she says, a reminder that all things are contingent - and so it was. She realised she'd been setting off in the wrong direction.
So I couldn't help but notice that there are a lot of germs in Smith's books, a whole cast of passersby who have the nerve to cough and sneeze and snivel in confined spaces. In Hotel World, the great riot of a novel that took her on to the Booker and Orange shortlists a couple of years ago, Lise, the receptionist, is sick with something undiagnosed and undiagnosable. People come to see her, but afterwards "they test themselves, listening for the press of glands and the slightest velvety creeping of the skin, the tenderness of throat, the small knock-knock of symptoms. Who's there? Vi. Vi who? Vi Russ, we met at your friend's house." And in Smith's latest collection of short stories, The Whole Story And Other Stories, the possibility of contagion is rife - a fly crawls across a secondhand book, leaving residue; a girl coughs into her mobile phone on the train ("A cold. Yeah, really bad. Yeah, awful actually"); the glass in front of the tellers at the bank is "saliva-specked". Is she still terrified of catching something?
"Oh no!" She laughs at the idea, and it's true she does look pretty well, sitting crosslegged on the sofa in a London pub. She is 40, but dresses like a boy - jeans, T-shirt, trainers, a leather jacket. Her eyes are very blue, slightly slanted, and there is a point to her chin - an intelligent, slightly mischievous face. The sneezing and the hay fever in her books don't stem from any trauma, she says, it's "just my Virgo paranoia, it's hypochondria really". Her own illness had as much to do with hating teaching and the increasingly corporate university environment as anything else. "I had it very lightly, I have to say - it glanced off me like the wing of a bird. I know people who've had it much worse."
When she first set about writing, nobody wanted to know. There were bad poems, hundreds of them ("maybe five good ones"). A collection of short stories, Free Love, was rejected by just about every publisher in the country over the course of a year, before finally being accepted by Virago. The rejection letters said Smith's stories read "like lifestyle descriptions", which she took to mean that they were too gay; at any rate, she was describing the wrong kind of lifestyle. It's an odd objection, whichever way you look at it: Smith's first collection, like the ones that have followed it, deals with first love and family and memory, the big universals; it's hard to see what might be considered "lifestyle" specific.
Now, of course, there's no better time to be a lesbian writer - it probably hasn't been this fashionable since Virginia Woolf and Vita Sackville-West started corresponding in the 1920s. Last year, Sarah Waters succeeded Smith on to the Bookershortlist with Fingersmith, and the BBC adapted her Tipping The Velvet amid promises of lots of period lesbian saucery (which didn't quite transpire). There is a whole generation of lesbian women - Jackie Kay, Patricia Duncker, Carol Ann Duffy, Joanna Briscoe, Louise Welsh - producing good new work: all those publishers who worried about buying into a niche market must be kicking themselves. About time, too: while literary fiction by gay men is now an established part of the mainstream - no one would dream of describing Colm Tóibín, Philip Hensher or Alan Hollinghurst as marginal or "lifestyle" writers - books by gay women continue to languish on the smaller women-only lists and in the "specialist interest" sections of bookshops, whatever their subject matter; I found one of Smith's books filed between erotica and urban literature studies.
But she doesn't see herself as a lesbian writer - she says the label has everything to do with marketing, and nothing to do with the work itself. "It's just fashion, isn't it? Being a Scot and a lesbian are two big handy ticks next to my name right now. And I'm fashionable, but not that fashionable - I don't do historical bestsellers, I'm just a little bit too literary." She concedes that "the attention has created a space for good writing which wasn't there before, but it's not important to me personally - I might fall in love with a bear or a tree or a chair." In one of her new short stories - a story she also contributed to an anthology edited by Diva magazine - the narrator does just that, falls in love with a tree: "I couldn't not. It was in blossom."
In any case, she says she has always thought of herself as "intergender", as much a boy as a girl. She has been with her partner, Sarah Wood, a documentary film-maker, for 15 years, but before that went out with a few men, an experience she has described as "terrible and fine - terrible because it was a mistake, and fine because it was real". Before that, she was madly in love with a girl back home in Inverness, but they kept their relationship secret and pretended to fancy boys - so she spent a lot of her teens and half her 20s leading something of a double life, a useful, if unhappy, experience for a writer.
Smith was the youngest of five - her nearest sibling is seven years older - and she says that with two brothers and two sisters, she almost felt she could choose which sex she wanted to be; she went for boy. On the other hand, she has a natural tendency to want to even things up, or at least to look at life from the opposite perspective. (This is the theme of her two most recent collections of stories, that you have to keep trying out different perspectives, that your viewpoint should never settle.) She remembers reading as a child a boys' adventure story called Ginger Over The Wall and deciding to rewrite it with girls, because there weren't any. "It really wasn't very good. I'd change things like, 'It was so hot you could fry eggs on the pavement' to, 'It was so hot you could fry chips on the pavement.'"
Her childhood in Inverness was "happy, secure". She wrote poems for her sisters, and was too young to be drawn into any of the sibling rivalry. Her father, who is English, worked as an electrician on the hydroelectric dams; her mother was a bus conductor. Both parents were bright, but had had to leave school at 14 and so were adamant that all their children went to university. Even now that they are in their 40s and 50s, her father keeps his children's degree certificates framed and hung in the hallway.
After she graduated from Aberdeen University, Smith went to Cambridge to study for her doctorate. She had never been before; the only pictures she'd seen were in the prospectus. "I remember driving down with my dad in the van," she says, "and we went past King's and there were cows grazing in front of the college and we just looked at each other and laughed. It seemed like the most made-up place in the world." Her time there was "both wonderful and noxious" - wonderful because she made a lot of friends, noxious because it was so pretty and pleased with itself. One of the funniest scenes she's written - and she's a funny writer - takes place in a Cambridge literature seminar, in her first novel, Like:
"A girl with short orange hair opened the door... Hi! she said, is it for the Katherine Mansfield?... We're talking about celibacy tonight, anything to put off reading Clarissa, I've got an essay for tomorrow, I mean, it's brilliant, it's all about rape, but I just can't face it, do you know what I mean?"
Smith won't say that Like is in any way autobiographical, but the culture clash is nicely observed - a couple of pages later someone works out that the new arrival is "Scotch! - I love Scotland! I love the people." Still, it was at Cambridge that she met Sarah, her partner, as well as Abigail Morris (now director of Soho Theatre in London) and the actress Cara Seymour, who played Nicolas Cage's girlfriend in Adaptation. The four of them wrote political-polemical plays about Thatcherism and the poll tax, and took them to the Edinburgh Fringe, where they got good reviews.
Smith strikes you as a generous person - in the space of an hour she will have recommended at least five writers, and as a book critic (she is a fiction reviewer for the Guardian) she doesn't like to take on anything she instinctively knows she won't like. Each of her novels is prefaced by no less than five epigraphs - quotes from Blake, Angela Carter, Tennessee Williams - and the remarkable thing about her fiction is the sheer number of voices she manages to get in. There are two narrators in Like, a book about childhood friends and what happens when one of them falls in love with the other; and five in Hotel World, in which the ghost of a dead chambermaid comes back to haunt the people she left behind (and some she never knew). Hotel World begins and ends in a great rush of language - two long unpunctuated monologues, one belonging to the ghost, the other her grieving younger sister ("I am watching TV for you in case you are missing it I am keeping up with Brookside for you it is seriously crap").
Smith is the opposite of a solipsist, incapable of telling a story from a single point of view. In the first of her new stories, The Universal Story, the perspective shifts seven or eight times while always being about the same thing - the history of a secondhand copy of The Great Gatsby, which changes hands and ends up as part of a 7ft boat made entirely from copies of The Great Gatsby, which then sinks off Felixstowe. This we see through the eyes of the bookshop owner, a fly, the many people who have owned the book, the man who buys it, and his sister (a conceptual artist). As a writer, Smith is fascinated by the way in which experience gets shuffled and passed on, mislaid and forgotten, but never really goes away. At the end of Hotel World, the schoolgirl narrator is horrified to think that bits of her dead sister are still sifting through the house: "a lot of dust is made of human skin so if that is true then some of Sara is in the Hoover". There are ghosts in all her work - the ghosts of dead people, but also the phantom half-lives of television characters, film stars, pop stars, absent lovers, all competing for space.
Smith wrote her doctorate on William Carlos Williams, Wallace Stevens and James Joyce, and the influence of Joyce is particularly strong. The new book begins and ends with a yes, like Molly Bloom's monologue in Ulysses. And the wonderful scene in Hotel World where a ghost re-enters the body it has left - "I went in one ear and out the other. I sang songs from West End musicals... till complaints rolling in from the neighbouring graves made me stop" - is close to Stephen Dedalus's train of thought in Ulysses's graveyard scene. Smith describes Ulysses as "a great splay of energy and life", and she shares Joyce's affirmative energy, his love of wordplay and enforced misunderstandings, that sense of community between the living and the dead.
Smith has never seen a ghost, although her father, who comes from a long line of psychics, once woke up to see the ghost of a murdered child in his bedroom (Smith notes, by way of qualification, that he has also absolutely definitely seen the Loch Ness monster). But if she's never experienced an actual haunting, and has no obvious telekinetic powers, she says she spends a lot of time listening out for "different, quieter voices". "We live in a culture where we're so fixated on surfaces. The fastness that we now think life is about, that we think of as our due, covers this great absence. And maybe so-called extrasensory perceptions are the echo of what's there."
Recently, she edited an anthology of 20th-century women's writing for Virago, along with Sarah Wood and the academic Kasia Boddy, and was struck by the amount of writing that has been lost or neglected. "There is so much experiment in these writers, so much force of energy - [Gertrude] Stein, Mansfield, Miles Franklin, who had to publish under a man's name. Hilda Doolittle is very underrated." These are the voices or ghosts to whom she feels most indebted. In their introduction, the editors describe the book as a "huge and necessary act of positive discrimination"; they also managed to sneak in a photograph of each of their mothers - Smith's, dressed in her air force uniform, appears at the beginning of the 1940s.
Smith has now started on her third novel - her rhythm has always been stories-novel-stories. Of course, her publishers were desperate for a novel to capitalise on the huge success of Hotel World (novels sell, stories don't), but it just wasn't happening - she wasn't ready. "I tried, but novels don't go away, you can't sleep. You wake up and it's still there, this crevasse that goes on for miles, and it's dark but you have to go down there, and keep going down there." The attention and the prize-giving didn't help. "The good thing was that it was a little literary novel that would have got lost otherwise - lots of them do. But the terrible thing is it makes you self-conscious, and there is nothing worse for a writer. I remember being at the Orange prize party and Margaret Atwood looked around at us and said [she does a portentous Canadian voice], 'Ladies: we are all sacrifices'."
Anyway, for now she is back in her expansive phase - perhaps one of the reasons she is drawn to the short story between times is that it reins you in, gives you focus. She is naturally someone who thinks big, who likes to take risks with form and language, and to see where her characters take her. In the end, her examiners at Cambridge decided her thesis covered too big a subject, and didn't give her the doctorate - she is the first to admit that "modernism and joy in Irish and American literature" was stretching it. But you could say that even then she was thinking along the right lines. She had found her subject matter - energy and life and love, the whole damn thing - but she was looking at it as an academic, an analyst, and as she says, "It's just not my priesthood." Now she's writing her own, resurrecting Joyce's notion of literature as a lark, a head-rush, a love letter to the world
· The Whole Story And Other Stories is published by Penguin next week at £10.99.