The photoplethysmographic (PPG) signal is defined as oscillations in light transmission through a tissue, which are created by heart beats. The light transmission through the tissue decreases during systole and increases during diastole and the general interpretation of these oscillations is that they are related to the increase of blood volume in the arteries during systole. Pulse oximetry, which is used for the measurement of oxygen saturation by means of PPG signals at two wavelengths is based on this interpretation of the PPG signal. However, the view that the PPG signal originates from systolic blood volume increase is challenged by the appearance of PPG pulses in light transmitted through tissues with rigid envelope, such as brain, dental pulp and bone, and appearance of similar pulses in studies on blood, periodically pumped in vitro through rigid glass cuvettes. In all these cases, increase of blood volume is impossible, and the oscillations in the transmitted light are attributed to change in the blood flow. The blood flow model of the PPG is based on oscillatory changes in red blood cells aggregation that result in changes in light scattering and absorption. Related issues are the fundamental assumptions inherent in pulse oximetry that the systolic increase in blood volume is of arterial origin and that the light absorption in the blood volume increase is proportional to the blood volume increase. These two assumptions also are discussed in the current chapter. Several studies indicate that a portion of the PPG signal might be due to change in venous blood volume. This effect can significantly affect the accuracy of oxygen saturation measurement by pulse oximetry.