Magnetencephalography (MEG) is a new diagnostic tool for the exact localization of the biomagnetic sources of the electrical activity of the brain. The extremely weak magnetic fields are generated by the postsynaptic activity of the neurons, acting like current dipoles. They are measured with a SQUID (superconducting quantum interference device). Only the tangential components of the dipoles contribute to the measurable field outside the head. For MEG localization of sources, the brain is modelled as a sphere of homogeneous electrical conductivity, the center of which is fitted to MR images of the head. As a model of the current sources a one- or two-dipole model is used. For the analysis of more complex sources, however, a principle component analysis (PCA) should be performed before the dipole analysis, or the current-density distribution should be used. The effect of background activity can be eliminated by alpha wave filtering and the dipole-density plot (DDP), which also increases the signal/noise ratio. MEG seems to be useful in purely functional lesions of the brain. A final decision on the value of MEG for routine diagnosis is not yet possible, however.