He is known for appearing on Have I Got News for You, Never Mind the Buzzcocks, QI, and Black Books as well as his stand up comedy. He is a self proclaimed "confused hippie" known for his thin goatee and long hair.

Bailey was listed by The Observer as one of the 50 funniest acts in British comedy in 2003, and in 2007 he was voted number seven on Channel 4's hundred greatest stand-ups.

Bailey was born on 24 February 1964 and is an only child. He spent the majority of his childhood in Keynsham, a town situated between Bath and Bristol in the West of England. His father was a general practitioner and his mother was a hospital ward sister. His maternal grandparents lived in an annexe, built on the side of the house by his maternal grandfather who was a stonemason and builder. Two rooms at the front of the family house were for his father's surgery. Bailey was educated at King Edward's School, Bath, where he was initially an academic pupil winning most of the prizes. However, at about the age of 15 years, he started to become distracted from school work when he realised the thrill of performance as a member of a school band called "Behind closed doors", which played mostly original work. He was the only pupil at his school to study A level music and he passed with an 'A' grade. He also claims to have been good at sport (captain of KES 2nd XI cricket team 1982), which often surprised his teachers. He would often combine the two by leading the singing on the long coach trip back from away rugby fixtures. It was here that he was given his nickname Bill by his music teacher, Ian Phipps, for being able to play the song "Won't You Come Home Bill Bailey" so well on the guitar. He spent his early years listening to Monty Python records, and rehearsing with a band called the "Famous Five", who he himself confesses were very bad but still much better than him and who, unexpectedly, had six members. However, he is a classically trained musician and received an associateship with the London College of Music. Despite this, he has said that he always had the temptation to be silly with music, a trait that influences his stand-up shows. Bailey often mythologises his early years in his stand-up. In his show Bewilderness, he claims to have attended Bovington Gurney School of Performing Arts and Owl Sanctuary. He talks about a succession of jobs he had before becoming a comedian, including lounge pianist, crematorium organist, door-to-door door-salesman and accompaniment for a mind-reading dog. A clip of Bailey's appearance in the dog's routine was shown during his Room 101 appearance. He also is self-deprecating about his appearance, suggesting he is so hairy that he is part troll, or that his hair or beard is a small animal named Lionel who he has trained to sit 'very very still.' Bailey also talks about his role as a "Disenfranchised Owl" in an experimental Welsh theatre troupe (mentioned in an interview with Australian newspaper Post). Other acting roles included a part in a Workers' Revolutionary Party stage production called The Printers, which also featured Vanessa Redgrave and Frances de la Tour. His trivia page on IMDb also claims that he was awarded Best Actor in the 1986 Institut Français awards. An avid Star Trek fan, he named his son (born 2003) after the Star Trek: Deep Space 9 character Dax and often refers to himself as a Klingon (once claiming during his "Part Troll" tour that his ear-mounted microphone made him resemble "a wizard in a call centre" and "a Klingon motivational speaker").