Neurophysiological studies demonstrated that increases in cholinergic transmission in sensory areas enhance the cortical processing of thalamic inputs. Cholinergic activity also suppresses the retrieval of internal associations, thereby further promoting sensory input processing. Behavioral studies documented the role of cortical cholinergic inputs in attentional functions and capacities by demonstrating, for example, that the integrity of the cortical cholinergic input system is necessary for attentional performance, and that the activity of cortical cholinergic inputs is selectively enhanced during attentional performance. This review aims at integrating the neurophysiological and behavioral evidence on the functions of cortical cholinergic inputs and hypothesizes that the cortical cholinergic input system generally acts to optimize the processing of signals in attention-demanding contexts. Such signals 'recruit', via activation of basal forebrain corticopetal cholinergic projections, the cortical attention systems and thereby amplify the processing of attention-demanding signals (termed 'signal-driven cholinergic modulation of detection'). The activity of corticopetal cholinergic projections is also modulated by direct prefrontal projections to the basal forebrain and, indirectly, to cholinergic terminals elsewhere in the cortex; thus, cortical cholinergic inputs are also involved in the mediation of top-down effects, such as the knowledge-based augmentation of detection (see Footnote 1) of signals and the filtering of irrelevant information (termed 'cognitive cholinergic modulation of detection'). Thus, depending on the quality of signals and task characteristics, cortical cholinergic activity reflects the combined effects of signal-driven and cognitive modulation of detection. This hypothesis begins to explain signal intensity or duration-dependent performance in attention tasks, the distinct effects of cortex-wide versus prefrontal cholinergic deafferentation on attention performance, and it generates specific predictions concerning cortical acetylcholine (ACh) release in attention task-performing animals. Finally, the consequences of abnormalities in the regulation of cortical cholinergic inputs for the manifestation of the symptoms of major neuropsychiatric disorders are conceptualized in terms of dysregulation in the signal-driven and cognitive cholinergic modulation of detection processes.