Renae Smith was dancing at The Fridge nightclub in London several years ago when a girl approached her. "You must be from Melbourne," she said.

"How do you know?" asked Smith, who grew up in Oak Park.

"It's a dead giveaway - you're doing the shuffle."

To the untrained eye it might look like a cross between the chicken dance and a foot-stomping robot. But to the young nightclubbers who spend countless hours mastering it, the Melbourne shuffle is an art form, and recognised in international dance circles as Melbourne's own.

"On the dance floor, Melburnians go crazy," says Sarah Mitchell, 27, of St Kilda. "They have this dance style called the Melbourne shuffle and they just go off."

Alistair Weddell, 22, agrees. He discovered the shuffle at Hard Kandy, a Friday night dance event in the city, after a calf injury brought him here from New Zealand for surgery two years ago. Weddell, who now lives in Melbourne, says the shuffle is "the most innovative dance-style that has come out since breakdancing. It's so much more relevant to young people than any other dance I know," he says.

Europeans tend to dance from the hips up, says Smith, who now lives in London. In Melbourne's techno and trance clubs, where the shuffle is most common, it's all about the feet.

The shuffle is a fast heel-and-toe movement, coupled with a matching arm action. While the dance is free-form (no two people ever shuffle exactly the same) the basic step involves repeatedly shuffling your feet inwards, then outwards, while thrusting your arms up and down, or side to side, in time with the beat. The upper body continues to "bop" with the music.

With practice, shufflers can add a 360-degree spin, a fancy side-step or two, and even a double-footed jump to match the peaks of the music. Talcum powder is sometimes sprinkled on the floor so dancers can slip and slide faster as they shuffle. There's even a competition, the Shuffle-Off, held in Melbourne every few months.

The shuffle is one reason why, to the thousands of Melbourne people who go nightclubbing every week, this city has a unique dance culture. More than 100 clubs - most but not all of them in the central business district and inner suburbs - cater to the electronic dance scene.

Other events such as raves or outdoor dance parties can be held anywhere: in stadiums, on vacant land under the West Gate Bridge and in country paddocks. Country dance events are known as "bush doofs" - doof, because that's what the beat sounds like. Ten years ago a good rave would draw no more than 400 people "who actually knew what techno was", says Richie McNeil, a DJ, dance party promoter, and, according to urban myth, one of the creators of the shuffle.

Now events such as Summadayze, held on New Year's Day, and Two Tribes, held at the Rod Laver Arena on the Labour Day weekend, can draw crowds of up to 20,000.

Melbourne's summer party season began last Saturday when 7500 people went to Earthcore in a volcanic crater near Ararat.

There is plenty of money in dance. DJs fly in from Britain or Europe for big parties and can earn up to £$40,000 a night.

Andy Van, from Frankston, is part of dance duo Madison Avenue, whose single, Don't Call Me Baby, topped the British charts two years ago. He says Melbourne ranks as one of the world's top dance capitals.

"You go to Ibiza, London, Europe, LA, and Australia. Every freaking DJ in the world wants to come and work in Australia on New Year's Eve.

Pete Tong, Roger Sanchez, Fatboy Slim - they all love it here."

Entrepreneur Michael Gudinski, who made his name in Australian rock, has sniffed the wind.

In 1998 he sold his company, Mushroom Records, relegated his rock and pop releases to his boutique label, Liberation, and created a new company, Agent Mad, to bring out international DJs.

Meanwhile, Gudinski's old label - now called Festival Mushroom Records and owned by News Limited - has also moved into dance.

"Traditionally, we've been a rock label, and we wanted to diversify a little," says Festival Mushroom managing director Michael Parisi. "There was a big, gaping hole for dance in this company."

Gudinski says that "running nightclubs and working with imports, I could see dance music growing and I took it very very seriously pretty early on".

Personally he's not a complete convert - he still prefers rock and roll.

"I'm still waiting for the act that really captures the buzz and vibe of dance..."

Yet Gudinski's shift shows how much the dance scene has changed in the 10 or so years since it got a grip on Melbourne. The crowd is larger, more diverse and younger. Events are often more commercial, and ticket prices for both clubs and big dance parties have soared. Five years ago, dance party tickets ranged from $30-$45; today it's up to $80.

The number of parties in Melbourne has also risen. From 1998 to 2000, Agent Mad staged about one event every two months. In the past two years, it has hosted twice as many each month. Future Entertainment, Australia's largest dance promotions company, has also increased its events.

But some clubbers are unhappy about the growing commercial element. The imported mainstream dance music festival Gatecrasher lost money last year after only 6000 people turned up over two days at the Old Scotch Oval site. It was due to run again last weekend but was cancelled this year. However, organisers say it will be back in next year.

The continuing success of Earthcore, held last year on the same weekend as Gatecrasher, shows that dance is still thriving. Yet "people love Earthcore because it is still underground and organic and it has an identity," says DJ and Earthcore publicist Barrie Barton.

He is less enthusiastic about the scene overall. "In the heady days of dance, the major appeal was that it was underground. Nowadays you can hear the same music at nightclubs as on Nova FM. Being part of something different is lost."

Finding good venues is another problem. Dance music has thrived in Melbourne, as it has in Manchester, because the two cities are full of disused industrial warehouses that are great sites for parties. But this is changing with the inner-city apartment boom.

Cyclone Wehner, who writes on dance for Beat magazine, agrees that Melbourne is Australia's dance music capital. But for promoters wanting to host larger events, "there are fewer options since the Docklands became unavailable. It baffles me why people move to the city to live and then complain about the noise".

These complaints are bound to increase, because the scene just keeps on growing. Jason Ayoubi, co-director of Elsternwick-based Future Entertainment, says his crowds are now made up of "QCs, lawyers, journos, IT specialists, doctors. I'd say 30 per cent of our crowd are made up of students. My dad's been sick and I'm always getting hassled by his specialist and surgeons for (dance) tickets for the whole hospital."