Some properties and applications of the N1-P2 complex (100-200 ms latency) are reviewed. N1-P2 is currently the auditory-evoked potential (AEP) of choice for estimating the pure-tone audiogram in certain subjects for whom a frequency-specific, non-behavioural measure is required. It is accurate in passively cooperative and alert older children and adults. Although generally underutilized, it is an excellent tool for assessment of functional hearing loss, and in medicolegal and industrial injury compensation claimants. Successful use of N1-P2 requires substantial tester training and skill, as well as carefully designed and efficient measurement protocols. N1-P2 reflects conscious detection of any discrete change in any subjective dimension of the auditory environment. In principle, it could be used to measure almost any threshold of discriminable change, such as in pitch, loudness, quality and source location. It is established as a physiologic correlate of phenomena such as the masking level difference. Thus, N1-P2 may have many applications as an 'objective' proxy for psychoacoustic measures that may be impractical in clinical subjects. Advances in dipole source localization and in auditory-evoked magnetic fields (AEMFs) have clarified the multiple, cortical origins of N1 and P2. These potentials are promising tools for the neurophysiologic characterization of many disorders of central auditory processing and of speech and language development. They also may be useful in direct 'functional imaging' of specific brain regions. A wide variety of potential research and clinical applications of N1 and P2, and considerable value as part of an integrated, goal-directed AEP/AEMF measurement scheme, have yet to be fully realized.