Bill Bailey, Vaudeville Theatre

What a trouper Bill Bailey is. Just as he's introducing what is clearly meant to be a showstopper in which he and the audience would create a number in the style of “maestro of melancholia” Moby, his technology lets him down. But no fear, Bailey ad libs for several minutes as he tries to rectify the problem, knocks out an Irish reel on one of the many instruments on stage, and moves on when it's clear that the “Moby song" will have to remain unsung.

Moby gets off lightly among the musicians Bailey mentions –  Madonna, Kanye West, Bono and Adele all get a subtle kicking, while Elton John is memorably described as “a preposterous, wiggy, button-nosed berk”. But such is Bailey's charm and the almost throwaway nature of the remarks, they never come across as cruel. And besides, this is a man serious about his music; he even demonstrates the different positions of where a tongue should sit in a guitarist's mouth; one signifies a rock 'n' roll god, the other that you can't play the instrument very well.

Despite the plethora of instruments (most of which are used at some point), this isn't an evening of musical comedy. The music interleaves the more straightforwardly stand-up material, and Bailey starts the show with a dissection of modern politics, both in the UK and the US. In a wonderfully extended metaphor, he likens the current Labour Party to a band you have followed for years that suddenly bring out a challenging experimental album. Like much of his material, this is inspired.

Bailey skitters between subjects – a death metal version of ABBA's “Waterloo” is followed by an anecdote about his love of bird-watching, how an iPhone ring can be turned into a decent riff follows a mention of his days in the sitcom Black Books – and the only "proper" jokes he tells are read out from a piece of paper. But this being a Bill Bailey show, they're not really jokes, simply a route into another surreal image he conjures for us, of Lionel Richie walking into a pub.

If there is a theme to Limboland, it is to take enjoyment in the world around us, explained in another lengthy but riveting set piece about how the British respond to “How are you?” almost universally with “Not too bad”. It's a terrific piece of observational comedy, and one that allows Bailey's verbal dexterity to take flight as he lists - rather poetically - some of he things in life that really aren't too bad at all.

The show ends with a beautifully told story about the disappointment of a One Direction concert, where Bailey is enraged by their lack of talent and showmanship, contrasted with meeting Paul McCartney. Backstage at the O2, Bailey and his starstruck mate Kevin prove themselves incapable of coherent thought, action and speech in the presence of this pop god, and the story builds layer by layer to an explosion of exquisite embarrassment. Despite the occasional duff line, this is an evening of superb comedy from a comic in top form.

• Bill Bailey is at Vaudeville Theatre, London WC2 until 17 January 2016; then touring from 2 May