  We address the question: Why may reaction-diffusion equations with hysteretic
nonlinearities become ill-posed and how to amend this? To do so, we discretize
the spatial variable and obtain a lattice dynamical system with a hysteretic
nonlinearity. We analyze a new mechanism that leads to appearance of a
spatio-temporal pattern called {\it rattling}: the solution exhibits a
propagation phenomenon different from the classical traveling wave, while the
hysteretic nonlinearity, loosely speaking, takes a different value at every
second spatial point, independently of the grid size. Such a dynamics indicates
how one should redefine hysteresis to make the continuous problem well-posed
and how the solution will then behave. In the present paper, we develop main
tools for the analysis of the spatially discrete model and apply them to a
prototype case. In particular, we prove that the propagation velocity is of
order $a t^{-1/2}$ as $t\to\infty$ and explicitly find the rate $a$.
