It's the 1940s, and though the Spanish Civil War is officially over, there remain pockets of partisans in the woods still trying to damage the fascist state. To an army outpost set up in an old farm to wipe out these remnants comes the commander's pregnant wife and Ofelia her daughter. It's a place of grimness and menace, and Ofelia immediately feels the enmity of her new father Captain Vidal, a wonderfully hateful and coldly sleek performance by Sergi Lopez.

She seeks consolation in her storybooks, and discovering old earthworks in the farm's grounds, finds herself led by a ‘fairy' insect to enter a fantasy world, where unlike in the real world she has status and power. It's a shame that the very word fairy in English conjures up a kind of gauzy soppiness, for this is something quite different, the disturbing world of European myth, of monsters, of violence. Ofelia's descent is not into a safe haven but into a dark and frightening world where bad battles with good. And in the rain-sodden real world above ground, men are routinely killed in the grim woods, and the sadistic Vidal holds sway over his soldiers and household alike. Death is brutal and sudden, the good seem powerless, and there are torture scenes so menacing that they make George Clooney's fingernails being ripped out in Syriana seem easy on the eye by comparison.

With her mother increasingly ill, Ofelia finds warmth in Mercedes, the housekeeper, who is secretly helping the partisans' cause, one of whom is her brother. Meanwhile Ofelia's fantasy life becomes almost equally doomful. Given quests by her mentor, a faun (though not by any means out of the same stable as Mr Tumnus) she enters the labyrinth of a monster from deep in the European psyche, a mythic figure who owes much to Goya's Saturn Devouring One of His Children. For a while she is bereft of her magical help, and things fall apart back up on earth. Like the most powerful fairytales, there can be no happy ever after, because the world here is one of tragedy, where death can only be answered by death, sacrifices have to be made, and the good that prevails is of necessity itself a harsh and merciless one.

Terrific performances, by Sergi Lopez as Vidal, an embodiment of fascism, whose only notion of family is as a self-replacating power machine, by Ivana Baquero as Ofelia, on whose back the film rests, and Maribel Verdin, taut and strong as a violin string as Mercedes. See it, but be prepared for a little of that grey, doomed world to lodge in your heart.