Dendritic spines occupy a strategic position in the central nervous system, yet their function is still under debate. Over the past decades, many hypotheses have been put forward to explain the specific function of spines. Recently, imaging experiments have demonstrated that spines compartmentalize calcium, a role that appears necessary for input-specific forms of synaptic plasticity. In addition, it has been discovered that spine morphology is plastic over fast time scales and can be controlled by specific biochemical pathways. Also, several aspects of the spine's morphology appear to be intricately linked to its function. The authors review these recent data and incorporate them into a model for the function of dendritic spines in CNS circuits. In their proposal, spines serve to specifically connect sparse inputs and therefore minimize the wiring necessary in the CNS while maximizing connectivity. By virtue of the same design, spines isolate inputs and thus implement local learning rules. These rules appear only necessary with sparse inputs so these two functions are intimately related. Spines therefore would play a crucial circuit role, remarkably analogous to synaptic matrix elements of associative neural networks. This model highlights the economical, yet elegant, design of CNS circuits.