Understanding the pathogenesis of non-alcoholic steatohepatitis has recently assumed great importance with the recognition that it has the potential to progress to fibrosis and cirrhosis. The 'two-hit' model of pathogenesis was proposed in 1998, with the first 'hit' - steatosis - increasing the sensitivity of the liver to the second 'hits' mediating liver injury. The main aim of this chapter is to review this model in the light of studies that have been published over the subsequent 4 years. Particular attention will be focused on the role of insulin resistance and recent advances in our understanding of the basic cellular mechanisms linking obesity and insulin resistance. Based on this information I will propose a modification of the two-hit model that places more emphasis on the role of free fatty acids. This model will provide the basis for further research and enable the rational design of treatment strategies.