Whenever I'm mooching around London, especially in a neighbourhood I don't know very well, I tend to head straight for the nearest internet cafe. There are fewer of them than there once were since smartphones and Wi-Fi became commonplace. Still they persist  shabby hubs for students, Airbnb itinerants, everyone priced out of the digital revolution.

Their sputtering computers, above which hang Met Police posters warning against sites of a pornographic or "extremist" nature, are portals to countless micro-Londons: type a single letter into a search engine and details come tumbling out about what previous users have been looking up. Depending on where you are, there'll be live streams of Turkish minor-league football, the latest episode of some Eritrean soap opera, details of knocking shops specialising in Lithuanian women or shaky footage of anti-American demagogues waving their fists.

When read alongside undeleted Word documents detailing immigration battles, divorce proceedings, STD dramas, applications for council housing and badly spelled press releases for pop-up gallery shows, what emerges is the digital unconscious of the capital. Here, in all its cacophonous fragmentation, is a real-time archive of London.

The possibilities and chatter found in these cyber shacks come to the fore in Craig Taylor's splendid oral history of the city. He is, like many of the best writers about London, an outsider, having grown up in a small seaside village in western Canada before moving to the UK in 2000. Fortunately he had a miserable time at first, often feeling "lonely, duped, underprepared, faceless, friendless".

Fortunately because it meant that instead of cabbing the city like a businessman on an expense account, he trudged its endless pavements and pressed up against the windows of its crowded night buses; he learnt very quickly to see it as an emotional topography rather than just a landscape of signs and wonders. Nothing gave him as much solace as a passing drug dealer calling him "bruv".

Londoners, its lengthy subtitle evoking the compendious quasi-ethnographies of Victorian writers such as GA Sala, is made up of more than 80 interviews with a broad range of inhabitants: commercial airline pilots, manicurists, squatters, beekeepers, dominatrices, hedge fund managers and even Laetitia Sadier from the band Stereolab. It's topped and tailed by naysayers  a departee characterises the city as populated by "Asperger's people" and "an exercise in frustration management"; an antique clock restorer, sounding like Marlow in Conrad's Heart of Darkness, claims: "All evil originates here  industrialisation, capitalism, imperialism." But the general mood, as indicated by the rather hazy chapter headings  "Getting On With It", "Getting Along", "Putting on a Show"  is one of grumbling rather than jeremiad, tart observations rather than denunciations.

Oral history doesn't have a great reputation these days. Academia tends to view it as naive, untheoretical, a throwback to the 1970s and 80s when local councils were happy to fund the publications of booklets assembling the memories of dockworkers, lamplighters and first-generation immigrants. Yet some of the most important studies of London  Raphael Samuel's East End Underworld on the career criminal Arthur Harding, Tony Parker's The People of Providence, about a south London housing estate  emerge from this tradition.

Taylor, whose first book Return To Akenfield followed in the footsteps of Ronald Blythe's 1969 portrait of an English village, has a talent for finding interlocutors, building up the intimacy needed for them to speak freely, and sensitively pruning the resulting deluge of words to uncover their essence. One marvellous vignette finds him "speaking to a human statue out on the corner of Floral Street in Covent Garden. He was on a break, and when I asked him how he did it, he said, 'You learn discipline in Estonia'."

What makes Londoners as valuable as any sociological treatise is Taylor's appreciation of the ways in which his subjects are themselves surveying, analysing and theorising the turbulent city in which they live. The categories according to which they interpret what they see are unusual and vivid: a paramedic discusses his work in terms of the cigarettes he smokes  the "euphoric fag" after he's saved a life or delivered a baby; the "run-of-the-mill fag" when he's bored; the "fag to stop you crying" when he's been unable to save a child. Elsewhere a nurse views the year in terms of sex. Her busiest times are from early December to the end of January, when "people go out and get absolutely bollocksed and have inappropriate sex with each other"; after Valentine's Day when she disburses lots of morning-after pills; and towards the close of summer when "everybody's been off to Ibiza and shagged the entire island, been shagged by the entire island". Perhaps she'd agree with Peter Rees, City of London planning officer, who claims the capital's greatest attribute is that "it has the best free sex in the world".

It's clear from the interviews that one of the key stories of the last decade has been the extent to which the city's bubble economy, inflated by property speculation, finance-sector rapacity and cheap foreign labour, has transformed the metropolis both imaginatively and culturally. According to a currency trader: "If it were a human being, a government market would be a very old, ugly woman. On the other hand, the currency market would be a very attractive blonde." Meanwhile, a street photographer complains that west and north London now "feel a bit like Invasion of the Body Snatchers or The Midwich Cuckoos or something, because there's thousands of women dressing out of a Boden catalogue".

Taylor's confidants prove that the city inspires its inhabitants to coin neologisms, torque meanings and create striking turns of phrase. An estate agent who prides himself on his ability to read his clients' body language claims: "If they're smiling in a property, you know that something's igniting their p-spot"; Tim, a miserable financier, says he lives in "Londin"  "It's a cross between London and Londis. You're not exactly at Waitrose, you're not even at Sainsbury's, you're not even at Tesco. It's a bit shit in Londin."

On occasions Londoners attains a level of eloquence as beautiful and blue as anything to be found in the works of Jean Rhys or Samuel Selvon. Stacey, a 16-year-old Geordie kicked out of the Tower Bridge penthouse she shared with a pop singer, drifts through the city, "pummeling it by foot, every day, wandering around like a little ghost feeling sad. A little ghost in a really short skirt with lots of make-up on." Sarah, a transsexual, explains that before her operation, "London was about systems, about circuits, connections, roads. It was an emotionless place where things simply operated. After the change London is an emotional place. I feel the flows of emotion. I see the sadness of buildings, the sad gorgeousness of light on the streets."

It's passages such as these that distinguish Londoners from the desiccated bibliophilia that characterises a certain strain of modern writing about the capital. Here, and also in Taylor's artful organisation of clashing voices, London is not so much  to use another metaphor that's common these days  an archaeological dig; rather, it's radiophonic terrain, a sonic spectrum. Its nearest equivalents are records: Peter Cusack's Your Favourite London Sounds, DJ Wrongspeed's Pirate Flava, Saint Etienne's What Have You Done Today Mervyn Day?.

At more than 400 pages, the book could easily have been twice as long. I would have liked more elderly voices. And younger ones, too; this summer's riots underlined how inaudible the capital's teenagers are. It's a shame that religion is mostly talked about in terms of Islam and, even then, mostly in relation to the social friction it can generate.

But this remains a remarkable volume, from the heaving, contradictory energy of its countless funny, terrifying, epic stories  crackheads looking for a lost swan in Baker Street, an Iranian homosexual shivering in Calais as he waits for a lorry to take him to his promised land, a Wiccan priestess tipping the remains of her spells over Waterloo Bridge. All this diversity serves to confirm the truth of what one of Taylor's interviewees tells him in a Cricklewood pub: "The only thing I know is that a real Londoner, a real one, would never, ever, ever eat at one of those bloody Angus bloody Steak Houses in the West End."

Sukhdev Sandhu's Night Haunts is published by Verso.