  In this paper we explain the strikingly regular activity of the 'grid' cells
in rodent dorsal medial entorhinal cortex (dMEC) and the spatially localized
activity of the hippocampal place cells in CA3 and CA1 by assuming that the
hippocampal region is constructed to support an internal dynamical model of the
sensory information. The functioning of the different areas of the
hippocampal-entorhinal loop and their interaction are derived from a set of
information theoretical principles. We demonstrate through simple
transformations of the stimulus representations that the double form of space
representation (i.e. place field and regular grid tiling) can be seen as a
computational 'by-product' of the circuit. In contrast to other theoretical or
computational models we can also explain how place and grid activity may emerge
at the respective areas simultaneously. In accord with recent views, our
results point toward a close relation between the formation of episodic memory
and spatial navigation.
