In a small, green garden overlooking the exposed salt flats of Wigtown bay and the distant hills and woods of Creetown, 81-year-old Nanette Craig is overseeing the planting of a new apple tree.

The tree is a Galloway Pippin, one of 32 apple trees that have been planted throughout the small Galloway town - currently embraced by the 16th Wigtown Book Festival - as part of a botanical visual art project by Scottish artist Natalie McIlroy.

McIlroy's project is part of a visual art strand which director Adrian Turpin has added to the programme in recent years, to add to its list of well-known names, authors, children's writers, locally themed talks and special literary events. These apple trees are being planted throughout the town, and in five years Ms McIlroy, who studied at Glasgow School of Art and is now based in Zurich, will return to mark their progress.

It was through apples - not words - that Wigtown first made its mark. It was even once called, in the distant past, Appie: it was re-named Wigtown by Anglo Saxons in 800AD. Mrs Craig, who had lived on a local farm with her husband before the BSE crisis destroyed their stock, leading to her relocation to Scotland's official National Book Town 13 years ago, loves the annual festival. She is also very pleased to have the Pippin in her garden. It is a descendent of the original apple trees that grew here in 60AD, when the Romans nurtured orchards to honour the goddess of fruit trees, Pomona, and Wigtown, or should that be Appie, was called another name - Epiake. "I love it here during festival time," Mrs Craig says, "it makes the place feel like it was 50 years ago: people talk to you in the street, everyone is friendly. It's very happy and there is such a great crowd of people that come here. It is a lovely place to be."

Wigtown's book festival this year features novelists Margaret Drabble, Rachel Seifert, Linda Grant, Kerry Hudson, comedians Robin Ince and Francesca Martinez, Jonathan Miller, broadcaster Clare Balding, and "Flying Scotsman" cyclist Graeme Obree, as well as a new series of tributes to the late Scottish poet and translator Alastair Reid, the eminent writer from nearby Whithorn who died in New York, aged 88, last week. The Saltire Literary Awards shortlist is being announced in Wigtown on Saturday, and there is a poetry competition for the town, as well as discussions on the independence referendum and the future of rural life. As well as McIlroy's Pippin Project, the Dumfries artist collective The Stove presented a new commission, Trading Journeys, which involved a flotilla of small boats travelling from Creetown to the town, followed by a vigorous parade.

The event's origins lie in the mid-1990s, when it was suggested Scotland should have its own book town, like Hay-on-Wye. Wigtown was chosen, which at that point was down on its luck: the festival's programme speaks of "many empty and rundown properties", its County Buildings were in danger of demolition, and there was high unemployment. There are now more than a dozen bookshops in the town, and the festival has a £2million impact to the local economy. There is a return on public investment of 37:1 (a statistic considered to be "high").

A quarter of people who attend come from outside Scotland. More than 100 local volunteers keep it running, with three permanent staff. And on the first night of this year's festival, with a crowd of locals and visitors followingthe pipers of the Kirkudbright & District Pipe Band one could feel the sense of local enthusiasm and participation. The next morning, my children mix with dozens of others at joyful and relaxed children's events in a small children's tent by Krisitina Stephenson, creator of Sir Charlie Stinky Socks, and Petr Horacek, the multi-award winning artist behind 30 beautifully illustrated books such as The Mouse Who Ate the Moon.

Adrian Turpin, director of the event for seven festivals (who lived for five years in the town, although now is based in London) is both happy with the festival and mindful of its challenges and issues.

Like the leader of many arts organisations throughout Scotland, he is anxiously awaiting the results of his application to Creative Scotland for regular funding, due at the end of this month. The money required to run the festival is quilted together from sponsors, supporters and key funders including EventScotland, Creative Scotland, and VisitScotland.

The festival has more than doubled in size in Turpin's time, from 70 events in 2006, to 214 this year.

Eclectic extensions include a youth theatre in Stranraer, a residency in a book shop, a programme for the inmates of HMP Dumfries, and WTF, a festival within the festival programmed by 15 to 25-year-olds.

Turpin says: "There was always, from the beginning, this essence, this otherness, some would say a little rough around the edges, with some random things in the programme that were always deeply entertaining. What I wanted to do is keep that essence - because that is what makes it, the volunteers, the unexpected things - so the key was keeping that while building infrastructures.

"The last few years we have done quite a big job of building the visual arts programme, and I think one of the things it does is open up accessibility: if you are in a town of 900 people, and the festival is there by the grace of those people then you have to do your damndest to try and include them - and visual arts does that, it creates a buzz that is outside the book events."

He adds: "For rural areas like this, you need events. In the Victorian era, Galloway had a degree of industry and the railway coming through here - it doesn't now. I think events like this and Spring Fling, Wicker Man, it is not just about the economics, it is also about the media coming here - it is a hook for articles about here all the year around, and that is important.

"One of the things you need in the country, is new inspiration. The danger is that a place like this can be quite inward looking -our job is to look outwards as well. There's a false dichotomy that you are either a local event, or you are a professional event that is outward looking, and what we are doing is breaking that down - I don't believe it.

"You can be exuberant, you can be frivolous, you can be focused on local history, but you can also do the big debates, you can discuss national politics, you can bring in literary writers like Samantha Harvey."

Turpin said he loves it when the two models collide, when he looks out over an audience and can see diversity: visitors who have come for the festival, people in the town who have grown up with it, "internationally renowned authors, a local farmer, Roger from the garage, the local councillor and Betty who runs Wigtown in Bloom".

He adds: "The challenge is to bring them together. It can be an awkward collision. But when it works, it really works."

Wigtown Book Festival runs to Sunday.

wigtownbookfestival.com