Some aspects of the function of the dentate gyrus (DG) and CA3 regions of the hippocampus are beginning to be understood, notably the way that grid cell inputs from the medial entorhinal cortex (MEC) are processed to form place cells in the dentate/CA3. However, one aspect of DG function remains very puzzling: more than 95% of the cells do not fire in any environment. Here, I propose a possible explanation for these non-functional cells. Because of the competition mediated by feedback inhibition, only the most excited DG cells fire. Cells that do not spike nevertheless receive excitatory input from the grid cells of the MEC (these cells fire nearly continuously because they represent a property (space) that is always being processed). Experiments suggest that synapses on such cells will undergo long-term depression (LTD). Cells that have their synapses weakened in this way are less likely to be winners in subsequent competitions. There may thus be a downward spiral in which losers eventually have no chance of winning and thus become non-functional. On the other hand, cells that fire get stronger synapses, making them more likely to be subsequent winners. Because the long-term potentiation (LTP) in these cells balances ongoing LTD, these cells will be relatively stable members of the functional pool. Although these pools are relatively stable, there will nevertheless be some chance that LTD converts a functional cell to a non-functional one; in contrast, the probability of a reverse transition is near zero. Thus, without additional processes, there would be a slow reduction in the size of the functional pool. I suggest that the ongoing generation of new cells by neurogenesis may be a solution to this problem. These cells are highly excitable and may thus win the competition to fire. In this way, the functional pool will be replenished. To test this and other theories about the DG requires an understanding of the role of the DG in memory. Recent experimental and theoretical work is providing a better understanding of the unique memory functions of the DG/CA3 unit. This will provide a behavioural framework for testing the ideas proposed here.