In quiet moments, Jared Blank likes to kick back by looking at reviews of the world's greatest hotels on TripAdvisor. Specifically, the terrible reviews. Blank is a long-time analyst of the travel industry, and a user of TripAdvisor – the consumer review site that has become one of the world's biggest travel resources, attracting 41.6 million users a month, and featuring 40m reviews of hotels and restaurants worldwide. But the pettiness and hysteria of some of the complaints never fail to astonish.

"No melon is ever ripe enough for people on TripAdvisor," he says. "There are hotels that rate in the top five in the world, and people are still complaining. I'm always shocked by the comments: from the quality of the fruit, to the mobile-phone reception on an island in the middle of nowhere, to whether the person on the front desk was smiling sufficiently upon their arrival. It blows my mind."

I look up the TripAdvisor reviews of the Ritz in London. Out of 279, 166 give the hotel five stars out of five, but 27 give it just one, and their reasons are varied and revealing – about the hotel, and also the reviewers. "Beware the stuffy and outdated dress code," warns one, "apparently being dressed head to toe in Armani and having a Prada handbag isn't good enough for this officious and petty hotel." Visitors praise the helpful staff and comfortable beds, but there are complaints about a musty smell, the paucity of gluten-free treats at afternoon tea and, as Blank predicted, the requisite gripe about "rotten fruit". It is a window into a delicious alternative world: one of disgruntlement for the reviewer, schadenfreude for the reader.

In fact, those reviews of the Ritz sum up all that is simultaneously brilliant and annoying about TripAdvisor: its celebration of consumer power, of the right for everyone's opinion to be heard and accorded equal weight – and the bewildering contradictions in its reviews.

No one is more annoyed by TripAdvisor right now than Duncan Bannatyne, the Dragons' Den panellist, who is considering legal action against the site, which he has called "despicable and cowardly". Bannatyne complained that a "dishonest" review compared his Charlton House spa hotel in Somerset to Fawlty Towers and asked TripAdvisor to remove the posting. "They have tried to bully me, they have sent threatening letters and emails, they have urged me to shut up, but they won't speak to me directly," he said. He says publishing defamatory or fake reviews is a threat to hoteliers, who cannot fight back.

Emma O'Boyle, UK spokeswoman for TripAdvisor, then issued this statement: "We offer hoteliers the opportunity to respond to every review written on TripAdvisor. However, in the case of Bannatyne's hotels we have had several worrying examples of individuals being intimidated by Bannatyne and his hotel representatives. TripAdvisor has a zero-tolerance approach on bullying as we defend the freedom of speech. We also take fraud very seriously and will investigate these occasions thoroughly."

The current size of the site must have been inconceivable when it was set up 10 years ago in Massachusetts, after an epiphany experienced by its co-founder, Stephen Kaufer, while booking a holiday to Mexico. He had gone to a travel agent, been given three brochures, "but I had no idea when this travel agent had last been to this destination," he said in an interview last year, "and obviously she was getting paid to send me to those places". So he decided to set up a resource where people could say what they really thought about their holidays.

One of the site's most popular features is its 6m photos, the snapshots that show the real size of the rooms, the state of the carpets and curtains, the quality of the breakfast. The terrible reviews prick the pomposity of hotels that would once have gone unchallenged: no establishment is above a negative review on TripAdvisor.

The result has been a seismic shift in power, from hotelier to consumer, which has, in many ways, been enormously positive for travellers. Where once we were vulnerable to the quirks and rudeness of countless Basil Fawltys, we now have a source of both warning and redress.

But is TripAdvisor taking the joy out of travel? With its dense tangle of information on everything from the size of the towels to the brand of coffee a hotel uses, the site has become a bramble patch to negotiate. You can look at reviews grouped by rating (five stars is "excellent", one star is "terrible") and by type of traveller – people who were away on business, for instance, or on holiday with their family. But on some level this just adds to the difficulty of sleuthing out a verdict. The English-language reviews are most likely to have been written by an American (13.6 million of the site's users are from the US, while 4.5 million are from the UK), and so consumers have to try to figure out whether they would have the same expectations of service and style as, say, a father of four from Florida. You can end up spending as much time choosing a place to stay as you spend away on holiday.

You know a problem resonates with the mainstream when it turns up in a Michael McIntyre sketch and there he was recently, it turns up in a Michael McIntyre sketch. You find a hotel you like, he said, "and it looks amazing. Big five-star reviews, five star, five star, paradise, it says, heaven, the best hotel you'll ever stay in. 'Oh, it was just the most miraculous two weeks of our lives. We were picked up from the airport on a unicorn, which flew us to our destination, which was so wonderfully beautiful, the beds were so comfortable, the fish would just come up and sacrifice themselves on the plate' . . . And you're sitting there at home, and you think, 'This is it, darling. This is the one we should go to – everybody loves this hotel.' But you keep searching, and you'll find it, page 36, one star. 'The waiter slapped my wife in the face.'"

If TripAdvisor has caused frustration among consumers, it has sparked fury in the travel industry – Bannatyne is not alone. Many hoteliers are enraged about the material posted about them, and are fighting back – both through legal routes, and in person. Last September it was reported that a cancer patient had been thrown out of a hotel in Blackpool after allegedly posting a negative review on TripAdvisor during his stay, reading: "dingy room, very poor furniture, only two handtowels . . . Definitely DO NOT BOOK HERE." The Telegraph reported that the hotel asked the man to leave for bad behaviour.

An "online reputation services" company called KwikChex, acting on behalf of more than 1,000 hoteliers, says it estimates there are at least 27,000 legally defamatory comments on TripAdvisor, "allegations that are false and should, if necessary, be tested in court". Chris Emmins, who runs Kwikchex, is in the process of contacting TripAdvisor about some of these specific comments, with "a notification saying: 'We regard these reviews as suspect, this user may now be open to legal action, please inform them.' We're hoping that people will reconsider their comments, particularly if they are a competitor, and remove the material they've posted . . . In virtually every country, when it comes to defamation, the judge will ask what opportunity the defendant has been given to correct the situation, so we're going this route to say, legally, we've done everything we can." After that, Emmins suggests, they'll take further legal action against the defamatory reviews that haven't been taken down.

One of the hoteliers involved in the KwikChex action is Frank McCready, who owns the Old Brewery guest house in North Yorkshire, and runs a website called I Hate TripAdvisor. He thought TripAdvisor was a brilliant idea at first, but soon changed his mind. "A lot of small businesses are being damaged," he says. "Some of the reviews that are put up there are malicious; you have competitors trying to denigrate other hotels in the area, and properties achieving reviews that seem impossible. As a hotelier in a small town in Yorkshire, I know all the other properties, and every town has a place that people know locally as somewhere you wipe your feet on the way out of. We ended up being rated lower than them, despite the fact that we've got three stars."

McCready would "like changes in the law that meant people who posted reviews had to be visible and accountable – if you publish something you have to use reasonable restraint, make sure your facts are right. I'm angry at the moment that it's not transparent, it's not honest, it's not straight. It's seriously damaging people's livelihoods."

Des Hague, owner of Thornsett House, a bed and breakfast outside Sheffield, says he has had enough of fighting for more positive coverage online; he is going to close. Recently, he has seen a massive drop in customers, "and I've decided to go and travel – that's been a long-time aim of mine, so I'm running the place down," he says. "I was going to leave it open, with Kitty my cleaner running it in my absence, but it's a full-time job now, keeping on top of this online marketing. There are all sorts of skulduggeries going on, and Kitty is in her 70s – it wouldn't be fair to her."

While these arguments rage and swirl, TripAdvisor is growing every day (there are 21 new posts a minute) with an average of 300 reviews for each hotel. The Bellagio in Las Vegas has the most, with 4,793 and counting. Sara Benson, a travel expert and writer, who runs the website The Indie Traveler, say she loved the site when it first started, because "it was full of savvy people, who were very technorati and experienced travellers, but now it's such a tidal wave of raw data that it almost makes you want to give up."

But once you're aware of TripAdvisor, it's virtually impossible to look away. Booking a holiday can be a highly emotional transaction, involving terror at the cost and anxiety that we only have two weeks away each year. Charlotte de la Pena, a teacher from London, has been kicking herself since a terrible trip to Biarritz, where she booked what looked like a great hotel, and was bumped to a much less salubrious property on arrival. It was only on her return that she checked TripAdvisor, to find that user after user had reported the same problem.

Not only is there a slew of information, it's not clear how much of it is reliable. Travel writer Edward Hasbrouck reported that at a marketing conference in 2006 a top advertising agency publicly declared it had a division "devoted to seeding online forums and bulletin boards with targeted content".

Whereas eBay users can only post a review on something they've actually purchased, TripAdvisor isn't a transactional site – it doesn't sell holidays, so anyone can post a review, without having to prove they've stayed in the hotel they're commenting on. When I ask O'Boyle from TripAdvisor whether there might be moves to make people verify their stay, she points out that "it's illegal to post fake reviews on the site in the UK, the US, and a number of other countries, and we do penalise hotels that have been found to be manipulating it. We have a number of measures in place to make sure that the reviews on the site are legitimate, we've got a whole content team that's responsible for finding and eradicating the fake reviews . . . If the reviews people read didn't match the reality, and the experience, people wouldn't keep returning, and we wouldn't have 53% year-on-year growth."

Even if you assume all the reviews are real, there's still the issue of those incredibly polarised verdicts to deal with. Kaufer's advice is that people should "ignore the very best and the very worst" reviews, and while this is undoubtedly wise, it's the reviews in the "terrible" category that introduce an unshakeable note of anxiety into your holiday plans. On an online messageboard for prospective brides, one woman writes about the paranoia she is experiencing having booked a resort for her wedding after consulting TripAdvisor. "I periodically check to make sure my resort is still getting good reviews," she says, but "the two most recent are TERRIBLE! The ones before that are good reviews, and overall the resort gets good reviews – but I just can't help but think 'what if everyone hates it and has a terrible time?'"

Benson believes our growing dependence on TripAdvisor is potentially making us less adventurous as travellers. "We're more risk averse," she says. "If a place isn't listed on TripAdvisor, or doesn't have good reviews, people don't want to try it." Where people used to set out on their travels with an open mind and a single guidebook, ready to be surprised, many of us now set off with hundreds of opinions churning through our heads.

In some cases too, where hoteliers are engaging with their reviews, it's genuinely changing the travel industry for the better. The owner of a Hampshire campsite had a glimpse of the dark side of TripAdvisor not long ago, when a customer "sent me an email saying he wanted a refund in exchange for not putting a bad review on TripAdvisor. I just wrote back and said, 'I'm sorry, that's highly unethical, I can't give you any money back.' So he put the review on."

But generally, the owner has found the site a great resource. He appreciates the fact that it doesn't allow bad language, and that he can put up a direct response to a negative review. And he has found it instructive. "The good reviews make you feel lovely, and the bad reviews make you do something about any problems."

"The public loves TripAdvisor," he says, "and you're not going to change that. Hoteliers might be disgruntled, but they won't get a good reception if they fight back." After all, however ripe you might think your melons are, the customer is always right.