The picosecond transient grating technique offers a new approach to the characterization of rotational dynamics and mechanical properties of thin liquid crystal films. Sample excitation by two crossed 100 ps pulses having parallel polarization results in two kinds of phase gratings: one due to the optical Kerr effect, and the other to a standing longitudinal acoustic wave. Rotational reorientation times are calculated from the relaxation of the Kerr grating, while the ultrasonic velocity and absorption are obtained by monitoring the acoustic response. If the excitation pulses are perpendicularly polarized, no longitudinal acoustic waves are generated, so that the signal is due exclusively to the Kerr effect. Whereas previous workers using ∼20 ns excitation pulses observed a single exponential Kerr relaxation in the isotropic phase, we are able to resolve the decay into a fast nonexponential component followed by a slow exponential component. While the slow component disappears below the isotropic→nematic transition, we can detect the fast component even below the nematic→smectic A transition in CBOA. An explanation of the fast component is proposed involving individual rather than collective molecular reorientation. The nature of the polarization grating resulting from perpendicularly polarized excitation pulses is described. An unusual property of this grating is that it acts like a half-wave plate for the diffracted signal. Thus the polarizations of the incoming probe and the outgoing diffracted pulses can be made orthogonal. The theory and implications of this result are discussed, and the extension of the transient grating technique to the study of model biological membranes is outlined.