This review is concerned with the operation of circuits in the central auditory system, how they transform response features and what functional significance may be attributed to those transformations. We focus on the role that GABAergic inhibition plays in processing interaural intensity disparities (IIDs), the principal cues for localizing high frequencies, and the transformations of IID coding that occur between the superior olivary complex and the inferior colliculus (IC). IIDs are coded by excitatory-inhibitory (EI) cells, so called because they are excited by one ear and inhibited by the other. EI neurons are first created in the lateral superior olive (LSO), but they also dominate the dorsal nucleus of the lateral lemniscus (DNLL) and regions of the IC. The three nuclei are intimately linked through a complex arrangement of excitatory and inhibitory connections. One of these is a crossed excitatory projection from the LSO to both the DNLL and IC. The binaural properties of EI neurons in LSO, DNLL and IC appear strikingly similar, suggesting that the EI properties created in the LSO are simply imposed on the DNLL and IC through the crossed excitatory projections. Recent studies support the idea that EI properties created in lower centers are imposed on some IC cells. However, other studies show that the circuitry linking LSO, DNLL and IC generates a number of response transformations in many IC cells. These transformations include marked changes in EI properties with stimulus duration, the generation of highly focused spatial receptive fields, shifts in sensitivity to IIDs, and the de novo creation of the EI response property. All of these transformations are produced by inhibitory innervation of the IC. An additional emergent property is also imposed on IC cells that receive GABAergic innervation from the DNLL. That property is a change in the binaural features of the IC cell, a change produced by the reception of an earlier sound whose IID is strongly excitatory to the IC cell. We illustrate each of these transformations, propose circuitry that could account for the observed properties and suggest some functional relevance for each. In the final section, we discuss some of the inherent uncertainties associated with attributing functional consequences to response features and then consider whether the transformations found in some mammals are species-specific or are universal features of all mammals.