Incineration. Trash into ash. The nation's landfills are bulging at the seams, and cities are scrambling to find places for their garbage. Here is a look at the two leading options - one that's particularly promising and one that's increasingly popular.

A MORNING'S garbage collection here at the North Andover incineration plant towers up like a battered version of Disney World's Magic Mountain. But by late evening, little more than a molehill or two remains on the loading-shed floor. In the interim some 1,250 tons of garbage from surrounding Boston communities has been converted into ash, a pile of contorted scrap metal, and ... 750 megawatts of electricity. The metal, destined for scrap outlets, is piled high outside, and the ash, now 10 percent of the original volume of waste and bound for a landfill, is in covered storage. The electricity has traveled unseen to a local utility.

The two-year-old resource recovery plant is one of a burgeoning number of mass-burn operations, which burn huge amounts of garbage as fuel in a power plant.

Waste to energy: In many ways the concept makes good sense, particularly to city managers desperately seeking a solution to the ever-worsening solid-waste crisis. And John O'Sullivan, manager of the North Andover plant, points out that as a fuel, garbage is independent of foreign suppliers and doesn't require freight trains to haul it long distances.

The United States now burns about 5 percent of its garbage in energy-recovery plants. That figure is likely to rise to 18 percent or so in the next three years, and could total 40 percent by the end of the century. Surveys by the magazine Alternative Sources of Energy indicate boundless optimism in the waste-to-energy industry.

But there is growing public opposition to mass-burn because of concern about the toxic ash left over after incineration, which requires costly disposal. Right now, the US doesn't classify the ash as hazardous waste; but if it is eventually moved into that category, as it is in Sweden, the disposal costs would climb even more.

Another strike against the industry is the huge capital cost associated with the mass-burn. Neil Seldman, whose Institute for Local Self-Reliance has done many studies on waste management for city governments, is an articulate opponent of incineration. He predicts an outcry of opposition when the high costs of mass-burn, compared with recycling, become more widely known.

Lee Sperber of Hollywood, Fla., agrees. He and fellow citizen activists are trying to prevent towns in southeast Florida from signing 25-year contracts with a proposed mass-burn facility. So far, five communities, including Hollywood (pop., 125,000) have resisted the move.

Under the agreement, the mass-burn facility would be guaranteed a profitable operation no matter how operating costs skyrocketed. If ash were to be declared a hazardous waste, the dramatically increased disposal costs would be borne by the taxpayers, not the shareholders. In addition, the company is guaranteed a minimum price of 6 cents a kilowatt-hour for the power it produces. So whenever the production cost dips under 6 cents a kilowatt-hour, taxpayers must make up the difference.

Mr. Sperber notes that residents of Westchester County, N.Y., had to pay $15 million in surcharges during the 1985-86 fiscal year, because the cost of electricity fell to 4 cents a kilowatt-hour, compared with the 7 cents the company was guaranteed. ``To sign away our rights like this for a quarter-century,'' Sperber says, ``is sheer madness.'' Yet such ``cast-iron guarantees'' in favor of incineration are common throughout the country, says Mr. Seldman.

A study just completed by Seldman's organization shows that ``mass-burn is twice as expensive as recycling.'' While the North Andover plant cost $196 million to construct two years ago, Jeffrey Klein, a financial analyst with Kidder, Peabody & Co. quoted recently by the New York Times, puts the present costs of a large waste-to-energy facility at $400 million.

All told, New York City is thinking in terms of a $3 billion investment in waste-to-energy facilities, and the State of New Jersey is discussing a similar amount.

Mass-burn officials acknowledge the high investment costs, aggravated by stringent antipollution standards. But they see the need to dispose of the nation's waste as overriding most objections. Says Mr. O'Sullivan in North Andover, ``I have phone calls every day, some of them from as far away as New Hampshire, asking if they can bring waste to the plant.''

The appeal of mass-burn to city officials is its relatively simple, turnkey approach to waste processing, whereas recycling is often more complicated and requires involvement by diverse groups.

Recycling, however, has its own appeal: cost savings. Automated recycling plants that are soon to come on line in the Minneapolis area and in Philadelphia - though having only one-third of the capacity of the North Andover incineration plant - are less than a sixth of the cost, at $18 million and $30 million, respectively.