The olfactory systems of vertebrates are able to discriminate a vast array of structurally diverse odorants. This perceptual acuity derives from a series of information-processing events that occur within distinct neural structures through which olfactory sensory information flows. This review discusses current knowledge concerning the mechanisms by which olfactory stimuli are initially detected and transduced into electrical signals that are transmitted to the olfactory bulb of the brain. It also reviews how information may initially be organized, or encoded, and then reorganized as it flows through the system.