Theoretical models of rodent navigation consider location information and directional heading to be essential. Indeed, the existence of location-selective 'place cells' and orientation-selective 'head direction cells' is well documented. Different models suggest different forms of interaction between information about location and heading direction. However, until recently, there were no clear empirical data that could be used to distinguish the different models in terms of the nature of the integration of location and directional heading information. Recently, Leutgeb et al. provided evidence that head direction and place signals coexist within the CA1 region of hippocampus, and that the head direction signals are likely to be generated by a subpopulation of interneurons. This finding opens up new possibilities for clarifying current models and for developing biologically plausible theories of synaptic interactions between location and head direction codes. In this paper, we first present the issue concerning the nature of the interaction between location and head direction signals, followed by a selective review of place and head direction cell research. The finding of Leutgeb et al. is then summarized, and its implications for current models are discussed. Finally, a view is presented that considers place fields to be a product not only of (external and internal) sensory input, but also of non-spatial variables such as motivation and responses. The finding of Leutgeb et al. and many earlier anatomical studies suggest that hippocampal head direction, motivation and response information may be represented by the interneuron population. Thus, these factors may have strong impact on the location codes of hippocampal pyramidal neurons. Their influence may further define the behavioral context of the current spatial environment.