Several kinds of nonlinear optical effects have been observed in recent years using silicon waveguides, and their device applications are attracting considerable attention. In this review, we provide a unified theoretical platform that not only can be used for understanding the underlying physics but should also provide guidance toward new and useful applications. We begin with a description of the third-order nonlinearity of silicon and consider the tensorial nature of both the electronic and Raman contributions. The generation of free carriers through two-photon absorption and their impact on various nonlinear phenomena is included fully within the theory presented here. We derive a general propagation equation in the frequency domain and show how it leads to a generalized nonlinear Schrödinger equation when it is converted to the time domain. We use this equation to study propagation of ultrashort optical pulses in the presence of self-phase modulation and show the possibility of soliton formation and supercontinuum generation. The nonlinear phenomena of cross-phase modulation and stimulated Raman scattering are discussed next with emphasis on the impact of free carriers on Raman amplification and lasing. We also consider the four-wave mixing process for both continuous-wave and pulsed pumping and discuss the conditions under which parametric amplification and wavelength conversion can be realized with net gain in the telecommunication band. 1678-1687 (2006). 4. R. A. Soref, S. J. Emelett, and W. R. Buchwald, "Silicon waveguided components for the long-wave infrared region," J. Opt. A: Pure Appl. Opt. 8, 840-848 (2006). 5. M. Dinu, F. Quochi, and H. Garcia, "Third-order nonlinearities in silicon at telecom wavelengths," Appl. Phys.Lett. 82, 2954-2956 (2003). 6. R. Claps, D. Dimitropoulos, V. Raghunathan, Y. Han, and B. Jalali, "Observation of stimulated Raman amplification in silicon waveguides," Opt. Express 11, 1731-1739 (2003). 7. H. K. Tsang, C. S. Wong, T. K. Liang, I. E. Day, S. W. Roberts, A. Harpin, J. Drake, and M. Asghari, "Optical dispersion, two-photon absorption, and self-phase modulation in silicon waveguides at 1.5 μm wavelength," Appl. Phys. Lett. 80, 416-418 (2002 3685-3697 (1973). 109. T. R. Hart, R. L. Aggarwal, and B. Lax, "Temperature dependence of Raman scattering in silicon," Phys. Rev. B 1, 638-642 (1970). 110. A. Zwick and R. Carles, "Multiple-order Raman scattering in crystalline and amorphous silicon," Phys. Rev. B 48, 6024-6032 (1993). 111. R. Loudon, "The Raman effect in crystals," Adv. Phys. 50, 813-864 (2001). 112. J. R. Sandercock, "Brillouin-scattering measurements on silicon and germanium," Phys. Rev. Lett. 28, 237-240 (1972). 113. M. Dinu, "Dispersion of phonon-assisted nonresonant third-order nonlinearities," IEEE J. Quantum Electron.39, 1498-1503 (2003).