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Transcranial magnetic stimulation (TMS) is now established as an important noninvasive measure for neurophysiologic investigation of the central and peripheral nervous systems in humans. Magnetic stimulation can be used for stimulating peripheral nerves with a similar mechanism of activation as for electrical stimulation. When TMS is applied to the cerebral cortex, however, some features emerge that distinguish it from transcranial electrical stimulation. One of the most important features is designated the D and I wave hypothesis, which is now widely accepted as a mechanism of TMS of the motor cortex. Transcranial electrical stimulation excites the pyramidal tract axons directly, either at the initial segment of the neuron or at proximal internodes in the subcortical white matter, giving rise to D (direct) waves, whereas TMS excites the pyramidal neurons transsynaptically, giving rise to I (indirect) waves. There are still other phenomena with mechanisms that remain to be elucidated. First, not only excitatory effects but also inhibitory effects can be elicited by TMS of the cerebral cortex (e.g., the silent period and intracortical inhibition). The inhibitory effect may also be used to investigate cerebral functions other than the motor cortex, such as the visual, sensory cortices, and the frontal eye field, from which no overt response like the motor evoked potential can be elicited. Second, there is an abundance of intraregional functional connectivities among different cortical areas that can also be revealed by TMS, or TMS in combination with neuroimaging techniques. Last, repetitive transcranial stimulation exerts a lasting effect on brain function even after the stimulation has ceased. With further investigation of the neural mechanisms of TMS, these techniques will open up new possibilities for investigating the physiologic function of the brain as well as opportunities for clinical application.