Spectral analysis of EXOSAT and Ginga observations of the Seyfert galaxy NGC 5548 has revealed a complex spectral form. At least four components, a steep non-thermal power law, an iron line, a 'hard tail' and a soft emission component, have been identified in the 0.05-20 keV range. The soft component arises from thermal emission by optically thick material. Hard X-ray illumination of this material gives rise to the hard tail, by continuum Compton reflection, and the bulk of the iron line, via fluorescence. Varying relative levels of the power law and reflected continua result in apparent spectral index variations. Spectral and temporal considerations lead us to the conclusion that the material lies close to the central energy source. We suggest that a region of highly ionized gas also contributes to the observed features, and changes in the ionization state of this material cause both variations in the measured low-energy column density and the relative amplitudes of hard and soft X-ray variability. The fact that the intrinsic power-law index of NGC 5548, GAMMA approximately 1.9, is steeper than the 'canonical' index, GAMMA = 1.7, has important consequences, both for emission models and spectral modelling of Seyfert type AGN.