In 1992, when Lollapalooza was a traveling alt-rock circus, Perry Farrell stood beside the stage and watched Pearl Jam. "They were playing in the afternoon," says Farrell, Lollapalooza's founder. "I remember thinking, 'This band is going to explode!'" Fifteen years later, Pearl Jam closed Lollapalooza – held the first weekend of August in Chicago – with a two-hour set, as fireworks exploded behind the main stage. "It wasn't exactly us who provided them, it was a stadium next door practicing a fireworks show," says Farrell. "But it was nice to imagine Pearl Jam thinking, 'Wow, these guys from Lollapalooza really go all out for us.'" It was an ecstatic ending for the more than 160,000 fans who filtered through Chicago's Grant Park during three hot days highlighted by high-energy sets from Iggy and the Stooges, Daft Punk, Yeah Yeah Yeahs, Modest Mouse, M.I.A., Amy Winehouse and Kings of Leon.
"Coming out onstage and seeing all the people there with the city behind them was just bananas," said Chicago rapper Lupe Fiasco, who performed Sunday afternoon. Fiasco was also stoked by a rare appearance by Daft Punk – who rocked the crowd Friday night with elaborate staging, including a giant illuminated pyramid – while Vedder sat in with Ben Harper for a heavy rendition of Bob Dylan's "Masters of War." On Saturday night, the audience split its attention between the dual headliners, Interpol and the British trio Muse. And on Sunday, Iggy Pop turned his set into a rock & roll orgy, inviting fans onstage during a ripping "No Fun."
Backstage, the performers gulped vodka drinks and cold beer in some much-needed shade. Patti Smith took pictures of her dogs; Kings of Leon hung out with their dad, Leon. Overall, Farrell was pleased with the results. "This year we placed the main stage facing the center of the park," he says. "We used feng shui, and it made the energy flow." He also made a Pearl Jam-style prediction. "I was really impressed with the band Ghostland Observatory – they could be a headliner in years to come."
Pearl Jam: Censored
Three-fourths of the way through Pearl Jam's Lollapalooza set. Eddie Vedder began singing, "George Bush, leave this world alone!" – but all fans watching via the online stream on AT&T's Blue Room web site got was sixteen seconds of silence. AT&T eventually admitted that Davie Brown Entertainment, the subcontractor AT&T hired to Webcast the festival, pulled the audio when Vedder got political. "We regret that it happened," says AT&T's spokesman. Pearl Jam have since posted the unedited clip on their web site. "I don't believe that a capitalist corporation . . . has the right to subvert the First Amendment of the Constitution," guitarist Mike McCready wrote in a statement. "When one person or company decides what others can hear, that is totalitarian thinking!"
This story is from the September 6th, 2007 issue of Rolling Stone.