Lateral inhibition represents the neural mechanism stabilizing the activity in neural networks. The present paper introduces the different types of lateral inhibition and presents the neurophysiological data demonstrating its existence in the nervous system. Lateral inhibition is mainly discussed in sensory organs. However, its manifestation in psychophysics are ambiguous. Some psychophysical phenomena do support the concept of lateral inhibition, other contradict. A possible explanation is a covering of the existent lateral inhibition network by excitatory synapses. Lateral inhibition therefore does not dominate the behavior of the whole system, even though it is important in stabilizing the excitatory activity in it.