The last decade has seen an unprecedented increase in the use of functional magnetic resonance imaging (fMRI) to understand the neural basis of cognition and behavior. Being non-invasive and relatively easy to use, most studies relied on changes in the blood oxygenation level dependent (BOLD) contrast as an indirect marker of variations in brain activity. However, the fact that BOLD fMRI is dependent on the blood flow response that follows neural activity and does not measure neural activity per se is seen as an inherent cause for concern while interpreting data from these studies. In order to characterize the BOLD signal correctly, it is imperative that we have a better understanding of neural events that lead to the BOLD response. A review of recent studies that addressed several aspects of BOLD fMRI including events at the level of the synapse, the nature of the neurovascular coupling, and some parameters of the BOLD signal is provided. This is intended to serve as background information for the interpretation of fMRI data in normal subjects and in patients with compromised neurovascular coupling. One of the aims is also to encourage researchers to interpret the results of functional imaging studies in light of the dynamic interactions between different brain regions, something that often is neglected.