The June 23, 2005 issue of Nature reports work by Christof Koch and colleagues on the existence of "face recognition" cells in the hippocampus of the brain. This paper got a lot of play in the popular press because some of the cells only responded to famous people such as Halle Berry. The group found that the cells were highly selective to various views of a given person but not to another person. I think this work confirms some current theories of memory (see for example McClelland et al. Psychological Review, 102:419 (1995)). It's also more proof that there isn't much difference between humans and other mammals.
It is known that cells in the hippocampus in the rat code for spatial location in the same way. A given cell will only fire when a rat runs through a given spatial location in a given environment. When the environment changes, that same cell will then code for a completely different location. Location is important to a rat, just as the recognition of people is important to humans.
When the hippocampus is removed, humans can no longer form long term memories. They can remember things as long as they pay attention to it but once they lose their train of thought, the memory is completely gone. It is thus thought that the hippocampus is a form of mid-term memory that stores lots of information that is then slowly uploaded to the cortex for longer term storage.
It's useful to have different memory systems for different time scales because every time you remember something new you run the risk of erasing something old. One way out of this conundrum is to separate long term memory from short term memory. Simplistically, your hippocampus would store whatever information comes in and indiscriminately overwrite old information. Then slowly over time, the hippocampus would upload information to the temporal cortex (perhaps during dreams) which would update its synapses in a controlled fashion making sure not to erase important old memories.
What this paper shows is completely consistent with this idea. From theoretical work on associative memory, we know that the capacity of any neural network is limited by how correlated the stored patterns are with each other. The more correlated the patterns, the more likely they are to interfere. Thus, one way to make sure you don't overwrite old memories is to make sure the input patterns are orthogonal. The hippocampus may serve this purpose. A very sparse code, where only a few neurons encode a given concept (like Halle Berry), automatically orthogonalizes the patterns representing given memories presented to the higher cortical areas.
A sparse code is not robust because if you knock out that particular neuron you lose the memory it coded. A more robust code would be a population code where a large group of neurons encodes a given concept. The problem with this type of memory is that it's hard to train a network. So the way to overcome the trade-off between robustness and speed is to have a fast but fragile system (hippocampus) feed inputs to a slow but robust system (temporal cortex).
It is known that inferotemporal (IT) cortex of monkeys also respond to faces among many other percepts and that a given cell in IT will respond to a wide variety of images. So, if they ever get a chance to implant electrodes in the temporal cortex of humans, I'm sure they'll find similarly behaving cells.