We present multiwavelength observations of Cygnus X-3 during an extended outburst in 1994 February -March. Intensive radio monitoring at 13.3, 3.6 & 2.0 cm is complemented by observations at (sub)millimetre and infrared wavelengths, which find Cyg X-3 to be unusually bright and variable, and include the first reported detection of the source at 0.45 mm. We report the first confirmation of quenched radio emission prior to radio flaring independent of observations at Green Bank. The observations reveal evidence for wavelength-dependent radiation losses and gradually decreasing opacity in the environment of the radio jet. We find that the radiation losses are likely to be predominantly inverse Compton losses experienced by the radio-emitting electrons in the strong radiation field of a luminous companion to the compact object. We interpret the decreasing opacity during the flare sequence as resulting from a decreasing proportion of thermal electrons entrained in the jet, reflecting a decreasing density in the region of jet formation. We present, drawing in part on the work of other authors, a model based upon mass-transfer rate instability predicting γ-ray, X-ray, infrared and radio trends during a radio flaring sequence.