General anaesthesia and many types of acute respiratory failure are accompanied by a decrease in functional residual capacity (FRC). This reduction promotes closure of dependent airways and alveolar collapse, thus impeding ventilation of these regions. Perfusion, on the other hand, is forced towards dependent regions by lowered pulmonary vascular pressure and increased alveolar pressure. Ventilation-perfusion (V/Q) inequality develops, impairing gas exchange and arterial oxygenation. Application of general positive end-expiratory pressure (PEEP) increases FRC and may improve gas exchange but cannot restore V/Q to normal. Differential ventilation, with equal distribution of ventilation between the lungs, and the application of PEEP solely to the dependent lung (selective PEEP) with the patient in the lateral position, improve V/Q matching and gas exchange with less impedance of cardiac output and less danger of barotrauma. This ventilation technique has proved successful in short-term experiments and in a small number of patients treated over several days.