The freely available operating system, initially developed by Finnish programmer Linus Torvalds and honed by a vast volunteer programmer "community", represents the first triumph for the open source software movement. Open source adherents advocate sharing the code, or basic digital blueprint, for software programs. Programs are developed over time by a sprawling collective. Basically, anyone can work on a bit of the system as long as any new code is also kept public, and programs are either free or available for a nominal sum.

This "gift economy" - the idea that if one gives something freely to the wider community, one will in turn receive things - is at the heart of the open source movement and the genesis of Linux. Of course, this is at odds with the greedy world of big software and hardware companies, profits, initial public offerings and acquisitions. That's what makes Linux's rise and rise one of technology's most curious tales. It's as if a small-town community football team suddenly found itself in Old Trafford with every prospect of beating Man United.

"It's an absolutely fascinating development, and it's glowing red-hot in the US," says analyst Martin Hingley, vice president of the European systems group in the UK offices of International Data Corporation (IDC). Why? "The customer is looking to avoid being tied to a single source [for an operating system]," he says. Linux can be downloaded by anyone for free from the internet, or, if you opt for some CDs and instructions, is available from companies such as Red Hat and SuSE at a small charge (under £50). At last count, more than 145 sources offered a version of Linux.

"The benefit is control," says Red Hat's chief executive Bob Young. "People are no longer beholden to their vendor." If Linux is (in the favourite American phrase) the poster child of the open source movement, then North Carolina-based Red Hat is the poster child for Linux. Yet such are the odd twists and turns of the Linux tale, that Red Hat itself is now seen by some as the Linux vendor that's getting too big and too successful, following an initial public offering (IPO) and the establishment of its own acquisitions fund.

Analysts agree that Red Hat fuelled Linux's success after it drew much-publicised investments from Intel and Netscape a year and a half ago. The Intel stake in particular raised eyebrows, since Linux is seen increasingly as a growing threat to Microsoft's domination in the OS market with Windows, and Intel and Microsoft had been partners for years.

Publicly, Microsoft had belittled Linux, but a leaked memo in October 1998, (www.tuxedo.org/~esr/halloween.html) expressed Bill Gates's true fears. "The journalists thought we were the David to Microsoft's Goliath but we had more engineers working on the OS than Microsoft did on Windows," says Young.

Linux suddenly had the friends in high places needed to get a firm foothold in the corporate marketplace, and software and hardware players practically stumbled over themselves to bring out a Linux product. Corel, Oracle, SAP, Compaq, Dell, IBM, Applix, Informix and Computer Associates all support Linux. The stellar roster of support in turn spurred investor fever and at the end of last year, tiny Linux-based companies saw their valuations head into the ozone when they went public. VA Linux's shares alone jumped 498% on their opening day, setting a market record.

Those developments have been crucial to Linux's rise, says Alan Cox, a core programmer and maintainer of the www.linux.org.uk website. "The rest of the world [has seen] free software going from a crazy concept to a marketed advantage and marketed in a way that the business community understands. The stock market flotations also gave [Linux] a definite air of reality."

But Linux's success isn't just spin. "There has been a lot of Linux hype from companies either because they sell Linux products or because they see it as a stick to bash Bill Gates with (or both). Hype doesn't actually create a large user base and sustained deployment which Linux, unlike Java, is getting."

In particular, Linux has gone from being seen as a desktop system for ubergeeks to colonising the server market, due to its reliability, say analysts. It's now the operating system of choice on 25% of all new server shipments, up from 16% in 1998, according to IDC. Up to 30% of web servers run Linux, according to some estimates.

Linux is expected to see 25% growth every year until 2004, and more than a third of enterprises use or plan to use Linux within the year, according to a recent report by analyst Booz-Allen and Hamilton. The number of Linux users grew from about 1,000 in 1992 to nine million last year, says the Tower Group, which predicts worldwide spending by the top 100 financial institutions on Linux will grow 32% a year - from $50m in 1998 to more than $200m in 2003.

Critics insist Linux will not move beyond servers into the so-called enterprise market of crucial computing functions in big corporations: after all, they say, who will trust a system that is free or comes from young companies just learning how to offer service?

But a Gartner Group survey of 650 companies indicates that 5% intend to use Linux this year for essential computing operations, and 13% say they will do so in the next year. In a much-watched development, IBM has signalled it intends to support Linux. Already the company has Linux up and running on its S/390 mainframe.

"We believe Linux could be the defining platform for all new applications," says IBM enterprise server vice president Launy Vang Anderson. IBM envisions Linux running alongside a business's earlier operating system on the S/390, giving access to a company's old data. He says it is easier to make big enterprise software programs such as SAP run on Linux than other operating systems such as commercial Unix offerings or Microsoft's Windows 2000 or NT. IBM thinks it can make money fromLinux by offering support and services - a plan which must make companies like Red Hat, modelled on the same business plan, nervous.

At the other end of the scale, Linux is increasingly the OS of choice for appliances: it is lean and agile, with a fraction of the code in commercial operating systems. Oracle, Intel, Gateway and NTL have all announced internet access appliances running Linux, and net access appliances are expected to overtakePCs in number by 2005.

So many uses for Linux, and so many vendors in the field, have led to concerns that Linux will "fragment" - split into a number of incompatible, competing OS offerings from different companies. Unix never became the strong, standardised OS many had hoped. With this in mind Linux, which is a clone of Unix, was created to succeed where Unix failed. Red Hat's Young argues that Linux will remain whole because Linus Torvalds still controls the software's core code, or "kernel".

Torvalds, in his Ask Linus column at www.linuxnews.com, says: "What will happen is that the 'market' fragments, as opposed to the technology. Which is good and proper. You'll have different Linux companies going after different markets, and having different priorities. Which means that you won't have any one particular 'Microsoft of Linux': you'll have dominant players, but they'll be dominant in the areas that they are good at. And nobody ever ends up being the best at everything."

Torvalds, who speaks half-jokingly of Linux achieving "total world domination", is clearly comfortable with commercial success (although he will not work for a company that could directly make money off Linux - he sees it as a conflict of interest).

So is Cox, who thinks that developers are nonetheless more loyal to Linux than a company they work for, and that Linux will never produce "Microsoft-like profits".

The developer community, though, still wrestles with the idea of blending success and Linux. Discussion lists on the pro-Linux site Slashdot have dissected the issue from every angle for months. "I write free software to make people (not least myself) happy. I don't do it to crush MS, I don't do it so I can become one of the high priests if the OS cathedral_ and I sure as hell don't do it for the f***ing silicon value mickey mouse money stock options," wrote one programmer.

Even those who cheer on Linux's commercial success wonder how companies will mould a business model around a free OS. Linux-based companies that went public spectacularly last year, including Red Hat, have seen their shares plunge.

But Cox is sanguine: "Linux is the sum of contributions so it will go where the contributors take it. Right now that is everything from IBM mainframes to pocket computers. Some of it is through investment and funding and a lot of it is because someone just thought it would be neat if Linux did XYZ and had fun working on it."

And in the end, fun may well be what ensures Linux's success, precisely because fun, the ultimate carrot on a stick for hard-core programmers, cannot be bought and sold.

Look up your Linux