In the tangled undergrowth of the indie-rock scene there are certain musical genres that re-emerge with some regularity. New wave, no wave, country, disco and garage rock all have their time in the sun, and then come back later in a new mutation. But three or four years ago, a genre appeared on the scene that hadn't really made its presence felt before: psychedelic folk.

The originators of this music came from a gnarled branch of the British music world of the mid-to-late '60s. The commercial face was Donovan; behind him and deeper underground were The Incredible String Band, Fairport Convention, Tyrannosaurus Rex and a host of other bands and individuals putting traditional folk sounds into the fire of the changing times. It was potent music wedded to the notion of hippie, and it died somewhere in the early '70s, when the glad rags and incense hit the unforgiving light of the new decade. With it went the far-out and far-reaching sense of journey - locked away, heard in the odd singer-songwriter, its traces found in the recurring psychedelic-rock revival - and the full blast has not come back until now.

Its return is marked by certain changes. Drug use seems to be down, the major record labels are at arms-length and the starry-eyed acid-for-the-first-time lyrics are gone. The latter is the key change in a movement that now goes under a variety of names, including ‘freak folk' and ‘free folk'. For while the predominantly acoustic nature of the music remains intact, with all its flights and open-tuned explorations, the vision is more grounded, hooked on nature and ecology, slippery relationships and the kooky take on life that you find in outsiders (especially young Americans) writing their first songs.

The avatars with breakthrough albums were Joanna Newsom and Devendra Banhart; it was they who tipped off the underground that something was happening. Newsom is the harp-playing, high-voiced songstress and Banhart the Nick-Drake-loving mystic who looks like he's just walked off the set of a peyote-fuelled Western. Both had hippie parents and both were exposed to very good record collections at a young age. This is something common to many of these new folk artists: a hunger to dig for music not only outside the mainstream but outside the usual slipstreams of indie taste. So interviews are filled with reverent references to long-forgotten or long-out-of-fashion artists who provide inspiration. The lists swing from cult singer-songwriters to acoustic blues (Michael Hurley, Mississippi John Hurt, Karen Dalton), to Brazilian and Eastern music, to the hippie end of Californian rock and folk (Caetano Veloso, the Grateful Dead, Linda Perhacs), and they give as good a description as any of the music the new generation makes.

Two important groups have crawled out of the mass: Vetiver and Espers. Vetiver are from San Francisco, and they're an ever-expanding collective built around the guitar playing and songs of Andy Cabic. They have put out two albums, To Find Me Gone (2006) being the latest. Good songwriting and an acute sense of atmosphere are to the fore; the albums are rambling and acoustic, with a delightful early '70s vibe that doesn't drown in its influences. Espers hail from Philadelphia, and are a different beast altogether. They're a six-piece, and their second album, Espers II, shows them moving away from the acoustic approach of their first disc to something far more textured and electric. There are now soft drums behind a sound that goes to the outer stratospheres of space rock, while still sounding like it's linked to the seventeenth century of dying maidens and moon cycles. This gorgeous seven-track album, which I first heard months after its release, was my favourite album of last year.

If Espers II, with its eight lines of gear listed in the album credits, is the dark river, then Meg Baird's Dear Companion is the clear water. She is a member of Espers, and her solo album, made at the same time, is a bare counterpoint to the layered and progressive tendencies of the band LP. Recorded in warm tones by fellow Esper and engineer Greg Weeks, Baird sings the ten songs accompanied only by her guitar, and that's it. I can't report on song arrangements, other instruments or producer intent, because there aren't any. This is someone singing songs into a microphone in an attic, and it's great.

Of course, there's all manner of art and decision implicit in the approach. First of all, Weeks has recorded her well. The guitar is woody and full, and Baird's voice is likewise. Why isn't this done more often? And why, especially in Australia, can't engineers pull off something like this without it sounding thin and tinny? Baird's choice of material is masterful, too. It's a fine mix of traditionals, such as ‘The Cruelty of Barbary Allen' and ‘Willie O' Winsbury'; intriguing covers, including ‘Do What You Gotta Do' by Jimmy Webb and ‘All I Ever Wanted' by New Riders of the Purple Sage; and two strong songs of her own. The sequencing of the record is a great weave, with the longer narrative ballads followed by the shorter, sweeter ‘pop' songs, and with the help of a little double-tracking of Baird's voice by Weeks, the album never falls from your attention.

What Baird and Espers and Vetiver are doing is brave. There is a lifestyle aspect to this as well; it's not just the music from the late '60s that is being re-awoken, but also that era's beliefs and outlook on life. The communal aspects and the soft-eyed gaze at the wonder of the world have filtered through, and it's perhaps no coincidence that a lot of this music, with its emphasis on withdrawal and the past, is coming out during the second term of the Bush presidency, and when the planet is in peril. The kids are in the woods.

It's brave also in the face of a music business geared to the quick shot and the relentless manufacture of the ‘new'. The music of these English-folk-loving groups fits the times. Other kindred spirits are around - Will Oldham, M Ward, Jolie Holland - but lately it's been the Vetiver-Espers-Baird contingent, and the deep trip they are taking in reviving and expanding a curious corner of rock history, that grabs. It's almost a case of unfinished business, the dying embers re-flamed, and Dear Companion is a vital part of the campaign.