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The olfactory epithelium is the body's specialized tissue responsible for detecting smells. It is a tiny, postage stamp-sized region located high up in the nasal cavity. This important lining hosts the olfactory receptor neurons, which are essential for sensing odors.

When you inhale, odorant molecules become airborne and travel through the nasal passage until they reach the olfactory epithelium. Here, these molecules dissolve in the mucus, making it possible for them to bind to the receptors on the olfactory receptor neurons. Each type of neuron is sensitive to different sets of chemicals, hence why we can perceive a wide variety of different odors.

Moreover, the olfactory epithelium includes supporting cells that aid in maintaining the necessary environment for the olfactory receptor neurons to function correctly and basal cells that act as stem cells, replenishing the neurons which have a limited lifespan due to their direct exposure to the external environment.

At the core of the olfactory system are the olfactory receptor neurons, which are responsible for the initial detection of odiferous molecules. Each of these neurons has hair-like cilia with receptors that bind with specific odorant molecules. They are quite unique, as they are the only neurons that directly contact the external environment and are continually replaced throughout life.

Olfactory receptor neurons express specific receptor proteins that recognize odor molecules via shape and chemical properties. When such a match occurs, the molecules trigger a chemical reaction within the neuron, resulting in a change in the neuron's electrical potential. If sufficient change accumulates, this leads to the generation of an action potential, which travels along the neuron to the olfactory bulb.

Interestingly, even though humans have about 400 types of olfactory receptors, we can detect and distinguish thousands of different odors, thanks to the pattern of activation across the population of receptors—an astonishing feat of neural processing.

Olfactory coding is the means by which the olfactory system interprets the chemical signals of odorant molecules into the perception of smell. This sophisticated code is based on which olfactory receptors are activated and the pattern of this activation. Similar to how letters form words, different combinations and activations of receptors can convey specific olfactory messages to the brain.

Upon activation, the olfactory receptor neurons send signals to the olfactory bulb, where the input is organized and interpreted. The olfactory bulb acts as a relay station and an area for the initial processing. Neurons in the olfactory bulb called mitral and tufted cells interpret the patterns and then project the information further along the olfactory tract to higher brain areas. There, complex processing occurs involving the integration of the odor signal with other sensory inputs and memories, ultimately resulting in the identification and perception of odors.

This intricate coding mechanism allows for an almost infinite combination of receptor activation patterns, making the sense of smell incredibly nuanced and sensitive. It is also the primary reason we are able to distinguish between myriad subtly different smells, and how we can often recognize smells that we haven't encountered in years.