As you walk into The Michael Pilch Studio this week for Annie Baker's 2013 American play The Flick, there's a scrawled notice announcing the play contains racism, sex references etc. But it's the wrong message. It should warn that only those seriously interested in other people and how those people live their lives should enter.

You're in the Flick Cinema. The lights go down, the projector's pointing in your direction, it's on and so is Woody Allen's b/w Manhattan, filling the wide screen behind you. The lights go up, the projector's off, there are 15 brown velveteen tip-up seats under your nose and the floor's littered with last night's popcorn, dribbling coke cans, sticky Nutella cartons and curling crisps. Two cleaners, Sam (Peter Madden) and Avery (Lee Simmonds) propel their brooms snail-like through the detritus. Soon they are joined by the projectionist, Rose. They clean, sit about, watch a few more film clips, compare lists of favourite movies, share a minor workplace scam and a bundle of confidences. The dynamic of the trio shifts and splinters like the coloured slips of glass in a kaleidoscope, a sort of reckoning is reached, the cinema enters the brave new world, and the signature music of Giuseppe Tornatore's Cinema Paradiso plays us out.

And that's about it. Not much narrative there, one might think. On this opening night, eight of the audience seemed to agree since they departed at the interval and were seen no more. But, from my seat in the front row in this tiny space, I was enthralled from start to finish by the lives being enacted just two metres away in front of me. Sure, this is slow-burn theatre and for the first 10 minutes or so the cleaners talk in banal, hesitant non sequiturs. They seem uninterested in their work – who would not be? – and their principal concern seems to be to express their individual tolerance or intolerance to the dodgy substances abandoned under the seats by the public who pay their wages. Then the next day Avery bursts into the cinema; he has problems. If The Flick's dramatic experience can be likened to the slow peeling of a giant Spanish onion, then the first thin layer here is removed.

These cinema employees have not been sent here by the local Job centre; they're film fans, and some of their favourites flash up on the screen behind us so we have to twist our heads simultaneously to take in both screen and the actors before us. We see Mr Bean on the beach to the music of Charles Trenet crooning 'La Mer'. There's Sam Peckinpah's The Wild Bunch and Raoul Walsh's The Naked and the Dead and Pulp Fiction and more. They bicker and josh one another. Bit by bit, their devotion to cinema and The Flick becomes more apparent; Avery, in particular, cherishes the 35mm celluloid system and is plunged into despair by the owner's threatened switch to digital projection. They exist before us, to an extent lost souls all.

Immediate Theatre has bestowed on Baker's script a production that does honour both to its characters and to its paean to film. Congratulations to Lewis Hunt who has designed a set that's simple but startling in its immediacy: the seats – he got them on ebay from Malvern – projector, glass panels and the wide screen. And you can almost choke on the popcorn and gag on the stale coke. The lighting is place - and moment-evocative. They've even carried off the last-minute loss to illness of the console techie with aplomb.

The actors are directed with endless skill by director Isabel Ion. Her placing of them within touching distance of us, having them speak for minutes at a time in conversational tones with never a hint of artifice, is just stunning. I said of Lee Simmonds, in a small part back in October last year: '....[he] has the priceless gift of being able to take his time and appear to be doing little, yet still give out energy to the audience'. Here is that gift again, and it's contagious since his colleagues here have caught that same bug. Lee seems entirely passive and malleable, he's inclined to be fearful, yet by degrees he persuades us of his character's iron will in defending his film preferences ('If you think [Avatar's a great film] we can't have a conversation. I'll have to quit this job!'. Near the end he shocks us by launching, like an Old Testament prophet, into a rant from Pulp Fiction, a stunning contrast to all that's preceded this aspect of him.

Peter Madden's Sam is more lively, a little sly about the ongoing 'dinner money' scam he and Rose are cooking up. Peter's entirely plausible as he mutates into someone much more troubled and unsure of himself. Antonia Clarke expertly conveys the perkiness and decency of her character, allied to doubt about her sexuality and the direction of her life. Her body- and face-movement are superb; at times it's all but impossible to believe she's acting.

As we emerged onto the street, I said to Markus Baumgartner, a hard-bitten veteran of theatre in Munich, Germany: "the acting we've seen is about as good as student acting gets". "More than that, if possible", he replied. I wonder when Oxford student theatre last offered psycho-drama that's as glitteringly, startlingly pure as this. Toss in the celebration with such grace and devotion of another art form, and you have a little masterpiece.