As an example of a novel set in an alternative universe, Thunderer is excellent. Called the "Metacontext", this story is set in a magical steam-punk sort of expansive City which includes high class and lower classes, art and crime, magical time and place traveling and Gods and devils as real tangible creatures. It is a long book but that only allows the reader to become more immersed in the wierd landscape. I think this is the most interesting alternative world since the post Cyber punk world of "The Diamond Age" (Neal Stephenson.
I liked the way the author, Felix Gilman gave us the first person view of one protagonist and yet also expanded the story to show us how that interacted and affected the larger story of the City. The story moves forward for the City and the protagonist and my interest was kept throughout.
"In a kaleidoscopic city continually transformed by divine powers, tragedy, romance and conflict collide, creating a world of literary magic. With Felix Gilman as their guide, readers who open this book will plunge into the shifting streets of a dazzling debut novel. His lyrical, wildly imaginative voice maps the unmaappable in this haunting tale." - Drew Bowling, author of The Tower of Shadows
This is an amazing first novel, and although to me falls short of its ambition a little bit, is well worth the read. People who like China Mieville's Perdido Street Station and Neil Gaiman's American Gods will see what I mean. (But both of those books are not first novels.) Thunderer is a very creative work that I'll still be thinking about later. I'm anxious to read Gilman's next novel. (Hope he's hard at work!)