We review the ideas and data behind the hypothesis that hippocampal pyramidal cells encode information by their phase of firing relative to the theta rhythm of the EEG. Particular focus is given to the further hypothesis that variations in firing rate can encode information independently from that encoded by firing phase. We discuss possible explanation of the phase-precession effect in terms of interference between two independent oscillatory influences on the pyramidal cell membrane potential, and the extent to which firing phase reflects internal dynamics or external (environmental) variables. Finally, we propose a model of the firing of the recently discovered “grid cells” in entorhinal cortex as part of a path-integration system, in combination with place cells and head-direction cells. © 2005 Wiley-Liss, Inc.