This paper considers the use of multilevel models in health research. Attention focuses on the structure and potential of such models and particular consideration is given to their use in elucidating the importance of contextual effects in relation to individual level social and demographic factors in understanding health outcomes, health-related behaviour and health service performance. Four graphical typologies are used to outline the questions that multilevel models can address and the paper illustrates their potential by drawing on published examples in a number of different research areas.