The group's first album since slimming down from a four-piece to a duo comprising Jon Marsh and Steve Waddington in 1987, the two members moved away from their previous, New Order-styled sound and drew influence from the late 1980s rave scene in London and from Black American house music.

The Beloved began at the University of Cambridge in 1983; originally named Journey Through, they consisted of Tim Havard, Steve Waddington and vocalist and band leader Jon Marsh, with drummer Guy Gausden joining the following year.

[2][3] Despite releasing several singles, the Happy Now EP and Where It Is compilation album over 1986–87, none of the band's music received notable critical or commercial success, which led to Havard and Gausden leaving the group by the end of 1987, rendering the Beloved a duo of Marsh and Waddington.

[6] Marsh found the Shoom and Spectrum raves that year life-changing; he later told i-D magazine: "The whole of 1988 from March onwards is a complete blur, an orgy of parties.

[6] The lyrics, chiefly written by Marsh, are happy and laden with hopeful optimism,[13] reflecting the hedonism prevalent in the UK's music scene at the time.

[6] Writer Colin Larkin recalls Marsh and Waddington promoting the album with "enthusiastic chatter concerning the virtues of floating tanks and hallucinogenic substances.

"[5] "The Sun Rising" is an ambient-styled track,[2] and features reversed guitars and madrigal singing sampled from an album of sequences and hymns by Hildegard of Bingen entitled A Feather on the Breath of God.

[9] "Hello" was issued as the follow-up single and became an international hit,[2] receiving much airplay and earning the duo a reputation as potential "successors to the Pet Shop Boys," recalls Lewis.

[12] It was named a "Staff Selection" in Spin, where reviewer Robin Reinhardt felt that the album's combination of pop and house resulted in a "catchy new disco noise that puts [the Beloved's] predecessors to shame."

He felt the album's rejection of "idiot pessimism" in favour of "hopeful optimism" was an informed choice, and concluded that the group's "tuneful rhythm tapestry will make you smile.

"[13] In Mademoiselle, it was listed among the "Editor's Picks", with reviewer Christian Logan Wright commenting that the album's "female backup, ecstatic abandon and three-minute testaments to the omnipotence of love make emotion sexy again.

[16] In The Rough Guide to Rock, Justin Lewis highlights Happiness as the best Beloved album, describing it as a "feel-good soundtrack to the early 90s pop and dance scene."

"[4] In The Encyclopedia of Popular Music, Colin Larkin commented that the album "perfectly embodied the tripped-out vibes of the times and sealed the Beloved's fashionable success in worldwide territories.