Studies conducted during the last three decades have identified numerous differences between musicians and non-musicians in neural correlates of sensory, motor, and higher-order cognitive functions. Research employing event-related potentials/fields has been particularly important in this framework. This chapter reviews the evidence that has emerged from these studies with emphasis on longitudinal studies comparing functional brain development in children taking music lessons and those engaged in non-musical activities. The literature provides empirical and theoretical grounds for concluding that musical training enhances sound encoding skills that are relevant for both music and speech processing. The question whether the benefits of musical training transfer to more distantly related cognitive functions remains controversial, however. Finally, it appears likely that training-induced plasticity alone does not account for the differences in brain function between musicians and non-musicians and, conversely, that predisposing factors also play a role.