Neural circuits are remarkably adaptable, providing animals with the ability to modify their behavior on the basis of experience. At the same time, they are extremely robust and maintain stability despite the changes associated with adaptation. This combination of adaptability and stability is difficult to achieve, and it provides a strong constraint on any models of plasticity in neural circuits. New evidence suggests that the effect of action potential timing on synaptic plasticity may be an important element in reconciling homeostasis with adaptability. In particular, spike-timing dependent plasticity can act as both an adaptive and a homeostatic mechanism, controlling overall firing rates and distributions of synaptic efficacies while making neurons selective for certain aspects of their inputs. It can also cause networks that initially represent the present state of a stimulus to predict its future state on the basis of experience, a theoretical result supported by experimental data in behaving rats.