Never has one throwaway movie line done so much to damage the reputation of a whole country. Even now, despite being one of the most visited countries in Europe, Switzerland remains one of the least understood.

The facts are that until national reconciliation in 1848, Switzerland was the most consistently turbulent, war-torn area of Europe (so much for brotherly love), and yet, both before and after it found stability, it brought forth luminaries in the arts and sciences of the calibre of Hans Holbein, Jean-Jacques Rousseau, Albert Einstein, Paul Klee, Hermann Hesse and Alberto Giacometti. So much for the cuckoo clock – a Bavarian invention, anyway.

But two centuries of tourism have left their mark: faced by an ever-increasing onslaught of visitors, these days the Swiss are content to abide by a quaint stereotype of Switzerland that's easily packaged and sold – the familiar Alpine idyll of cheese and chocolate, Heidi and the Matterhorn – while keeping the best bits for themselves. Come for a "Lakes and Mountains" package, or a week of skiing, or a short city-break, and you'll get all the pristine beauty, genteel calm and well-oiled efficiency of the Switzerland that the locals deem suitable for public consumption. The other Switzerland – the one the Swiss inhabit – needs time and patience to winkle out of its shell, but can be an infinitely more rewarding place to explore.

Within this rugged environment, community spirit is perhaps stronger than anywhere else in Europe. Since the country is not an ethnic, linguistic or religious unity, it has survived – so the Swiss are fond of saying – simply through the will of its people to resolve their differences. Today, a unique style of "bottom-up" democracy ensures real power still rests with the people, who seem to vote almost monthly on a series of referenda affecting all aspects of life from local recycling projects to national economic policy. The constitution devolves power upwards from the people to municipal governments and up again to the regions (known as cantons), only as a last resort granting certain powers to the federal government.

This kind of decentralized structure means that the cantons – which are, in essence, tiny self-governing republics who have volunteered to join together – have mostly held onto their own, unique flavours. Although Swiss people value their shared Swissness above all, they also cherish their own home-town identity and their differences from their neighbours. Tensions exist between the four language communities, as they do between Catholic and Protestant, or between urban and rural areas, while regional characteristics remain sharply defined and diverse. Local pride is fuelled by a range of traditional folkloric customs, most of which stem from pagan or medieval Christian festivals. Most prominent of these is carnival, held around the country on or around Mardi Gras, the last day before Lent. The most exuberant celebrations, held in Luzern, Bern and Basel, feature bands, masked parades, street dancing and spontaneous partying that belie the stereotype of a placid, unadventurous Switzerland. A host of smaller events fills out the calendar and it's still easily possible to stumble on village festivals that have been staged by local people for centuries past.

This sense of cultural continuity sits oddly with the fact that Switzerland has grown into one of the world's richest countries. Its economy is small-scale but thoroughly modern: traditional industries such as watchmaking and textiles now thrive by focusing closely on the luxury end of the market and have ceded prime position to engineering, pharmaceuticals and service industries. Tourism has been a high earner since the mid-nineteenth century, when the Alps became both a fashionable destination for wealthy travellers and a prescribed retreat for sufferers from respiratory diseases needing curative sunshine and fresh mountain air. And yet the country still stands alone. In the 1940s, Switzerland was surrounded by hostile Axis powers; these days, it's encircled by the "friendly" EU. Switzerland's dogged neutrality rings ever more hollow – and yet, far from embracing a wider perspective, the country has collectively taken a step into conservatism. Commentators are noting sadly that Switzerland is only now embarking on the kind of multi-ethnic social integration that its neighbours began in the 1950s.

Having taken centuries to bolt their country together from diverse elements, the Swiss seem instinctively to return to their sense of community spirit, expressed most tangibly in the order and cleanliness you'll see on show everywhere. Yet the sterility so decried by Graham Greene (who wrote Harry Lime's jibe about brotherly love), if it characterizes any part of the country, applies only to the glossy, neatly packaged tourist idyll of lakes and mountains. The three great Swiss cities of Geneva, Zürich and Basel are crammed with world-class museums and galleries. In Zürich and Lausanne, there's a humming arts scene and underground club culture that feeds nightlife as vibrant as anything you'll find in much larger European cities. The landscapes are dominated by the Alps and their foothills, but mountains aren't the only story. In the north and centre are lush, rolling grasslands epitomized by the velvety green hills of the Emmental, traditional dairy-farming country. Vineyards rise tiered above Lake Geneva, the Rhône valley and the Rhine. The southeast is cut through by wild, high-sided valleys, lonely, dark and thickly forested. Most surprisingly of all, bordering Italy in the south you'll find subtropical Mediterranean-style flower gardens, sugarloaf hills and sunny, palm-fringed lakes.

Switzerland may be a small, little-regarded mid-continental country with a serious image problem, but it has plenty more to offer than most visitors suspect.