Just one dress is kept apart, the dress her former lover gave her. She unzips it reverently from the bag. It's a long navy evening dress, all spangles and spaghetti straps. She didn't want to accept it at first, but she loves it and wore it when they went to a fashion show together. "It made me feel like a princess or something," breathes Karen. It's a feeling she can never have in her other incarnation as Andrew.

Karen Scott is an easy woman to be friends with. She's smart and fun, full of warmth and humour, thoughtful. Perhaps a little too controlled, perhaps a little vulnerable. Andrew is a mystery, his male features obscured by Karen's rouge-sculpted cheekbones, his male personality glimpsed through the filter of Karen's. Only three people in the world have met both Karen and Andrew - his wife, Frances, his former lover, Philippa, and a work colleague who invited Karen and Philippa to a cocktail party.

The first meeting with Karen is at Crosslynx, in Glasgow's Gay, Lesbian and Transgendered Centre, where once a month transvestites put on female dress and meet others like themselves. The room is large and bare, with forensically bright light, too clinical for people to want to discuss their deepest, most secret desires. Instead, they all sit round the edges of the room and watch a wig demonstration. It seems strange that this one word, "transvestite", should be used to describe all the different people here, but then the word "woman" has endless possibilities, too.

These voluntary women range from the youthfully pretty in jeans and fluffy pastels through to full-blown Dame Ednas with handbags and majestic bosoms. One young man still hasn't got a wig yet, and exudes anxiety through every thread of his ill-matching Chinese blouse and skirt. As the hairdresser demonstrates different wigs, and her ladyboy model squirms under the teasing of the more boisterous members of the group, Karen glides into the room, wearing a black blazer and black dress with a rose print. She looks graceful, classy, like a successful businesswoman or the wife of a successful businessman. She's a lady, where some of the others are simply men in frocks.

But then nothing is simple with this most baffling form of gender expansion. We like to think we accept homosexuals, and we rather patronisingly insist on bestowing our compassion on transsexuals, many of whom don't feel the need of it. But we're utterly, completely puzzled by transvestites. Men despise them; women find them creepy; they themselves can find no explanation for what they do. "It's all about masturbation," says a Dame Edna caricature, with the air of one cutting through the bullshit. But it turns out to be about much more than that . . .

Karen is chic in a pale blue scoop-necked sweater and navy skirt when we next meet in her flat in the West End of Glasgow. We park ourselves in her bedroom, two clothes fanatics blissful amidst this cornucopia of clobber. Before, Karen always had her clothes hidden away in black plastic bags, or in cases on top of the wardrobe, where she had to stand up on a chair to reach them.

"It was very much a bulimic-type activity, something you kind of deny. You're addicted and pretending you're not addicted," she says, in the low-pitched voice that she despairs of, though she has no need to. On the phone her voice is discernably masculine, but in person it seems warm and feminine, reminiscent of Garbo asking for her whisky and ginger ale on the side. "And don't be stingy, baby."

As a teenager growing up in the sixties in a big city, Karen was an opportunistic cross-dresser, trying on her sister's garments when no-one else was in the house. Such occasions were rare with a family of six (four children and her parents) in a small council house, so most of the time she would do other things, like play football or finish off her homework.

She insists her childhood was completely ordinary and bore no portent of the life she was to choose in the future. Her parents were office workers and not particularly imaginative or artistic. Her mother bought very ordinary, mumsy clothes, pretty much all she could afford.

"There was no dressing up in the family, no big box of things you'd play with with your sisters, the way other people have experienced. There was absolutely nothing in the environment," she says, though she does remember two small incidents when she was very young. One was trying on a nightie of her sister's and showing it to her mother when she came to say good night to them. The other was when her mother wanted her to try on a dress she was knitting for someone. "I was saying, 'Oh, no, no, no,' and protesting, but actually not minding at all."

It wasn't until Karen was in her twenties that she first bought a garment for herself, a knee-length flowery skirt which cost #1 from a market. She drove off in her car, stopped in a lane and tried it on. She had no wig, no court shoes, no make-up then. "It was at night and it was a quiet road. I think I got out of the car for a few seconds, keeping an eye open for headlights. It felt not exactly wicked, but a daring thing to be doing, exciting and a little bit scary, like going to a place you probably shouldn't go to.

"You're drawn to it, even though your mother said you shouldn't. There was excitement, tension, fear. It certainly wasn't sexual excitement on that occasion, though it can be. It was more a kind of frisson, flirting with danger."

She still has various flowery garments in her wardrobe and brings them out for inspection - an old-ladyish black blouse with mimsy little pink and yellow flowers, an Indian cotton horror with psychedelic flowers, a beige dress with tiny orange and black flowers that she wore the first time she went out after a Crosslynx meeting. They're the sort of dresses worn only by very young girls or by middle-class ladies who support fox-hunting. Karen looks wistfully at a white-sprigged frock with ruffles around the hem. "I used to like that," she says, sensing my deep disapproval of these garments. "I know - they're the sort of thing only a man would wear!"

For many years Karen led a rootless life, moving from place to place, job to job, partner to partner. She wasn't Karen then, was only cross-dressing sporadically, in little snatched moments. She had been to an all-boys school, and was unsure around women, but eventually she met Frances, a community worker, and they began living together. Sometimes she tried her partner's things on, though they rarely fitted. She certainly didn't tell Frances. "I wasn't ready to say it. I hadn't really resolved it myself, didn't accept it as part of my normal life. I wasn't able to tell anybody until I'd come to terms with it and realised: 'OK. It's time to quit agonising and start enjoying it.' That's the breakthrough - self-acceptance."

It felt increasingly wrong to her to hide such a major part of her identity from the person she was supposed to be closest to; then there was the terrible fear of being found out. She and Frances had been together 10 years when she finally told her. They went away for a weekend break in a hotel. "I started saying: 'There's something you don't know and I have to tell you,' almost hoping she would guess. But that didn't happen. She was saying: 'Just tell me. Just tell me.' I did just tell her in the end. I thought it would quite likely end my marriage but she was slightly relieved because a few months earlier she'd found lipstick on a cup and she knew it wasn't hers. Now she tolerates it, but really she would like it to go away."

Revealing herself to Frances meant two things: that she could wear a skirt at home if she felt like it; and that sometimes, more rarely, she could be Karen. She wasn't Karen at first. In fact, 15 years ago, when she first applied to join the UK's major organisation for transvestites, the Beaumont Society, she called herself Sally. "But that never felt like an identity, just a label. She wasn't a person, didn't exist. It was only when I started actually approximating the look of a woman that I thought there was some need for a new identity. It's very liberating to have a different identity, a different personality that you can slip into. I love it."

In this bedroom, with a whole personality expressed through clothes, identity seems a fluid and continually expanding concept. It's a process, a journey into possibilities, not the catalogue of needs promulgated by the Me Generation. You can see it in Andrew's wardrobe. As he slowly learned to become Karen, the clothes gradually became more elegant, less stereotypically feminine and girly. The dropped-waist cottons and frumpy patterns give way to sharp little sheath dresses and luxurious fabrics. There's dark red devore, black lace; there's viscose and velvet, aqua and lilac and rich electric blue. "That's the big difference between men's clothes and women's," says Karen. "In the menswear section the colours range from dark black to light black to light brown to navy. The fabrics range from rough to horrible. I have no interest in men's clothes. I don't like ties and that tightness round the neck. I hate the fabric of most men's trousers and the big, clumpy shoes. I like things to be fitted and elegant. The best time is in the summer, when trousers are hot and confining. Wearing a skirt feels very pleasurable, whether it's with bare legs or with tights or stockings on, whether it's down by your ankles or a wide flared one. It's sensuous.'

One of the dresses here, pale blue chambray with self-coloured embroidery on the bodice, was worn by Karen one summer's day to help an old lady in Edinburgh with some paperwork. The old lady told her to wear darker stockings so her ankles wouldn't look fat.

Another she calls her Lulu dress, not because she's a fan, but because the Glasgow singer was modelling it in the catalogue she bought it from. It's a sleeveless lavender tube dress, with single blossoms twisting delicately up the skirt.

"This is an important dress to me," says Karen. "I was standing at the bar in the centre wearing it, when a guy came up to me and asked if he could join me. I thought: 'Am I going to be chatted up here?' That's when he asked me if I'd like to model. I said: 'There are nicer-looking, younger women here,' but he said it was something to do with poise."

Now Karen has a job. Sometimes it's to do photo-shoots for the catalogue of clothes for transvestites that the man from the bar is publishing; sometimes it's to do secretarial work. She drives once a week to the company's office in Stirling, wearing elegantly simple clothes, a plain skirt and top or a dress and jacket. Her make-up is discreet, as she doesn't want to stand out from the non-voluntary women around her. "Women have great power," she says. "A woman can get what she wants by using a little tiny bit of sex appeal. Men are so easily manipulated - it's kind of sad. Once when I was driving to Stirling I stopped off for 15 minutes and didn't realise you were supposed to get a ticket. There was a traffic warden at the car. I just smiled at him and said: 'I'm really sorry. I didn't know. . . ' He said: 'Oh, all right then.' I'd never have got away with that as a man. To be a woman and smile was enough."

The irony in this most complicated of lives is that being a woman was never what Karen started out to do. At first she just liked the feel of women's clothes, and even today sometimes wears them at home without bothering to transform herself into Karen. Her transvestitism was a solitary act, secretive and shot through with sexuality even when there was no sexual outcome. To make it a sociable activity that she could share with another person Karen had to look as much like a woman as possible. "I'd prefer it to be a choice to go out as a woman rather than a requirement," she says drily.

She might have been happy to go out with a skirt and a man's haircut, but society and propriety demanded that she conform. We draw a firm line between the genders and you cross it at your peril. "We constrict men far more in terms of personality," says Dr Gareth Hughes, a clinical and forensic psychologist at Kneesworth Hospital, Hertfordshire. "Men are expected to be more stable, more consistent. There's a vague cultural expectation with women that they're a little more quixotic, a little more ephemeral. Women have the right to change their mind - men are supposed to be forceful and know exactly what they're doing."

Karen may not have known exactly what she was doing, but she certainly needed plenty of forcefulness to pursue this way of life that society finds so strange. In Scotland, with our traditional national dress of the kilt, we should have no difficulty accepting men dressed in skirts, but then the kilt, as Karen points out, is heavy and made of rough fabric. It doesn't caress the body with the sensuality of silk, doesn't whisper across the skin in the breeze. It may look wonderfully romantic and colourful, but it's a swaggering male garment that requires braggadocio in the wearing of it.

That seems not to be Andrew's style. Philippa, his former lover, says he's almost odd as a man. "He's not the sort of person you come across every day. He's someone who would strike you as being, not exactly on the margins, but really quite reserved. He's extremely orderly and mentally quite alert and rigorous. But he had no idea of himself as attractive to women. Being with him was outside any experience I've ever had. I just knew this was an extremely sensitive and sensual person. He didn't know it and I knew it. It was so intense, so completely different."

Philippa herself is exuberantly, vivaciously feminine, brimming over with thoughts and ideas about the man she fell in love with. Her toned, slender body is clad in figure-hugging black sports clothes - as a GG, or genetic girl, she has the luxury of wearing trousers and still feeling feminine. She says it was the man who attracted her, not Karen. He'd told her he had something to say that would probably mean she'd never want to see him again. Then one day he gave her a dress. It was so tasteful, so exactly right for her that she asked him where he'd bought it. Eventually, something clicked. He'd got it for himself. "I wasn't surprised, I was intrigued," she says, in her light, mellifluous voice. "One part of me felt: 'Oh my gosh, how on earth can I handle that?' The other part just thought: 'That's part of who you are and who I love and that's fine.' I do feel a lot of compassion for him, because I don't think it can be easy, but I also just love that part of him."

Rather than open the door one day to this completely new person, Karen, Philippa decided to take part in the process of creating her. The two of them sat together and got ready to go out one evening. They had a glass of champagne and Philippa did Karen's make-up. "It all gradually built up in a very wonderful way," says Philippa. "There's an in-between stage which I love, without the wig, with maybe a little bit of make-up. It's a David Bowie, androgynous kind of look that I really, really like. That did make me wonder about myself. Was I attracted to women? But I'm not. It's just this person. Being with him was sweet, it was funny, it was just lovely."

Karen tries not to wonder about herself, resists all psychological analysis about her family and her early life, though it's interesting that the first and almost the only thing she says about her mother is that she was sometimes angry. Dr Hughes says you could speculate this means the mother was emotionally absent and the child wants to create a feminine stereotype he can control. Karen says she doesn't believe there's any explanation for transvestitism. If there was a pill she could take to stop her doing this, she wouldn't.

"At its best it can be like being on a sexual high for hours on end even when there's nothing sexual about it. It's as if you're going into an altered state of consciousness, a prolonged high. That has a very addictive quality to it. It's very, very powerful, a different way of being and feeling. Reaching altered states of consciousness is a very important human drive.

"Once you've achieved your hierarchy of needs - food, shelter, warmth, reproduction - that's when you start searching for a change in your state of consciousness. It's what chanting's all about, whether it's in Eastern religions or African religions or our watered- down Western religions. To lose your ordinary, busy train of thoughts and be released from that into a more sensory world is a fundamental urge."

We've sighed over the smoky grey lace dress she wore to the cocktail party with Philippa, admired the maroon flocked velvet sheath dress she's never worn. It's a fine spring day. Time to go out for a drink. "Now, which shoes?" asks Karen. It's the last of the myriad tiny decisions that go into the creation of any elegant woman. She has the filmy print dress and the navy jacket, the jaw-length rather than the perky bobbed hair, jewellery, lipstick, a little less rouge perhaps? A touch of Ysatis perfume. Finally the shoes. Will it be the slightly too big navy courts with the pointy toe and fine stiletto-ish heels? Or the slingbacks with the diagonal bar across the foot? She chooses the court shoes, stuffing tissue in to make them fit.

It's the wrong choice. We walk down a steep hill and her feet are sliding in the shoes. But Karen doesn't care, because she loves the feel of the breeze on her legs and neck, loves the fine fabric of her dress flowing with her as she moves. She feels free, alive.