Transcranial magnetic stimulation (TMS) is rapidly developing as a powerful, non-invasive tool for studying the human brain. TMS is currently a target of interest of both basic science investigators and clinicians. In this procedure a pulsed magnetic field generated extracranially induces focal intracranial electrical discharges that can temporarily excite or inhibit specific brain areas. In this way there is possible to alter the functioning of the brain beyond the time of stimulation, offering potential for therapy. TMS has been used in the investigation of neurological and neuropsychiatric disorders, and more recently has emerged as a tool in the study and treatment of depressed mood. TMS is being evaluated as a possible alternative to electroconvulsive therapy for the treatment of refractory depression. This review examines the basic principles underlying transcranial magnetic stimulation. Published studies in this field are summarized and paper reviews TMS as an investigational and treatment tool in schizophrenia, affective disorders and anxiety disorders. It concludes by discussing safety issues, limitations, and directions for future research.