  The method of graded contractions, based on the preservation of the
automorphisms of finite order, is applied to the affine Kac-Moody algebras and
their representations, to yield a new class of infinite dimensional Lie
algebras and representations. After the introduction of the horizontal and
vertical gradings, and the algorithm to find the horizontal toroidal gradings,
I discuss some general properties of the graded contractions, and compare them
with the In\"on\"u-Wigner contractions. The example of $\hat A_2$ is discussed
in detail.
