WHEN the Venice canal paintings by the handily-named Giovanni Antonio Canal, aka Canaletto, were last shown in the Queen’s Gallery at Holyroodhouse in Edinburgh in 2006, they lacked the context that distinguishes the new display in the exhibition Canaletto and the Art of Venice, which runs until October and is likely to prove extremely popular.

Canaletto did for Venice what no single artist has done for the Scottish capital, despite Edinburgh also being a feast of picture opportunities. Even if you have visited the Italian city, it is likely that your mental picture of it incorporates the images that wealthy travellers on the Grand Tour took home in the form of his oil paintings. The Royal Collection of Canalettos, however, came the way of Buckingham Palace as a job lot from his agent, Joseph Smith, who was also the British consul in Venice and whose vested interests you would hope might be the subject of some questions these days. But then there is an element of corruption in the works themselves, as Canaletto thought nothing of resizing and even relocating buildings in his paintings to make a pleasing composition. In the days before the possibilities of Photoshop reshaping the human figure and dropping characters into foreign locations, he was sending his customers home with views they could never have seen.

While the Queen’s Gallery show 12 years ago had the swank of “Look what a lot of Canalettos we got” about it, and took the desirability of such an astonishing assemblage of 18th-century picture postcards now worth millions for granted, the new exhibition asks important questions about our relationship with commercial art, then and now. One might draw obvious parallels with the modernising efforts of the Royal Family itself, but I am sure you have read more than enough about today’s lavish nuptials elsewhere. Or chosen not to.

What Canaletto did was as much static theatre as art, and of course it was as a scenic artist in the theatre and for opera that he began, apprenticed to his father Bernardo Canal, with clients including Alessandro Scarlatti. Look on these paintings as stage sets – and the vast Regatta canvas commissioned by Smith is a glorious example – and they make better sense. Then you begin to notice other things about the works beside the meticulous depiction of the architecture and the unlikely uniformity of the waves on the water. Although his humans are necessarily small and far away, Canaletto emerges as a fine figurative artist, populating his works with richly clad merchantmen and their wives, uniformed gondolieri and balconies packed with sightseers of all classes, no doubt including his tourist client-base.

Another room in the new show puts this side of Canaletto in context, with figurative works by some of his contemporaries that add another, more intimate side to the exhibition’s picture of 18th-century Venice. Giovanni Battista Piazzetta made celebrated drawings in chalk and charcoal and Smith owned three dozen of them, of which the most theatrical is The Procuress, in which the titular old dame is whispering in the ear of a damsel as the prospective client looks on. There is as much drama in Pietro Longhi’s 1744 oils The Married Couple’s Breakfast and Blind-Man’s Buff, both of which cry out for thought bubbles above the various characters.

The other artist as immersed in the theatre as Canaletto himself is Marco Ricci, whose pen and ink drawings were evidently a direct influence. He also turned his hand to figurative work, including “caricatures” of the castrato singer Carlo Maria Michelangelo Nicola Broschi – better known by his stage name, Farinelli. It is distinctly possible that the buck-toothed fop he depicted is a more accurate image of this early opera star than his glossy airbrushed portrait by Bartolomeo Nazari in the collection of the Royal College of Music.