The lung volume at the end of a normal exhalation is called functional residual capacity (FRC). At this volume, the inward elastic recoil of the lung approximates the outward elastic recoil of the chest (including resting diaphragmatic tone). Thus, the elastic properties of both chest and lung define the point from which normal breathing takes place. Factors that alter FRC include body habitus, sex, posture, lung disease, and diaphragmatic tone. Induction of anesthesia produces an additional 15-20% reduction in FRC beyond what occurs in the supine position alone. A symptomatic decrease in FRC, resulting in hypoxemia, is the main indication for positive airway pressure therapy. By increasing transpulmonary distending pressure, positive airway pressure therapy can increase FRC, improve (increase) lung compliance, and reverse ventilation/perfusion mismatching. The major effect of PEEP on the lungs is to increase FRC. In patients with decreased lung volume, both PEEP and CPAP increase FRC and tidal ventilation above closing capacity, improve lung compliance, and correct ventilation/perfusion abnormalities. The resulting decrease in intrapulmonary shunting improves arterial oxygenation. Their principal mechanism of action appears to be stabilization and expansion of partially collapsed alveoli. Recruitment (reexpansion) of collapsed alveoli occurs at PEEP or CPAP levels above the inflection point, defined as the pressure level on a pressure–volume curve at which collapsed alveoli are recruited (open); with small changes in pressure there are large changes in volume.