  We discuss the implications of rapid (few-minute) variability in the TeV flux
of blazars, which has been observed recently with the HESS and MAGIC
telescopes. The variability timescales seen in PKS 2155-304 and Mrk 501 are
much shorter than inferred light-crossing times at the black hole horizon,
suggesting that the variability involves enhanced emission in a small region
within an outflowing jet. The enhancement could be triggered by dissipation in
part of the black hole's magnetosphere at the base of the outflow, or else by
instabilities in the jet itself. By considering the energetics of the observed
flares, along with the requirement that TeV photons escape without producing
pairs, we deduce that the bulk Lorentz factors in the jets must be >50. The
distance of the emission region from the central black hole is less
well-constrained. We discuss possible consequences for multi-wavelength
observations.
