We discuss 3 neurophysiological approaches to study auditory verbal hallucinations (AVH). First, we describe “state” (or symptom capture) studies where periods with and without hallucinations are compared “within” a patient. These studies take 2 forms: passive studies, where brain activity during these states is compared, and probe studies, where brain responses to sounds during these states are compared. EEG (electroencephalography) and MEG (magnetoencephalography) data point to frontal and temporal lobe activity, the latter resulting in competition with external sounds for auditory resources. Second, we discuss “trait” studies where EEG and MEG responses to sounds are recorded from patients who hallucinate and those who do not. They suggest a tendency to hallucinate is associated with competition for auditory processing resources. Third, we discuss studies addressing possible mechanisms of AVH, including spontaneous neural activity, abnormal self-monitoring, and dysfunctional interregional communication. While most studies show differences in EEG and MEG responses between patients and controls, far fewer show symptom relationships. We conclude that efforts to understand the pathophysiology of AVH using EEG and MEG have been hindered by poor anatomical resolution of the EEG and MEG measures, poor assessment of symptoms, poor understanding of the phenomenon, poor models of the phenomenon, decoupling of the symptoms from the neurophysiology due to medications and comorbidites, and the possibility that the schizophrenia diagnosis breeds truer than the symptoms it comprises. These problems are common to studies of other psychiatric symptoms and should be considered when attempting to understand the basic neural mechanisms responsible for them.