Using the concepts of chaotic dynamical systems, we present an interpretation of dynamic neural activity found in cortical and subcortical areas. The discovery of chaotic itinerancy in high-dimensional dynamical systems with and without a noise term has motivated a new interpretation of this dynamic neural activity, cast in terms of the high-dimensional transitory dynamics among "exotic" attractors. This interpretation is quite different from the conventional one, cast in terms of simple behavior on low-dimensional attractors. Skarda and Freeman (1987) presented evidence in support of the conclusion that animals cannot memorize odor without chaotic activity of neuron populations. Following their work, we study the role of chaotic dynamics in biological information processing, perception, and memory. We propose a new coding scheme of information in chaos-driven contracting systems we refer to as Cantor coding. Since these systems are found in the hippocampal formation and also in the olfactory system, the proposed coding scheme should be of biological significance. Based on these intensive studies, a hypothesis regarding the formation of episodic memory is given.