Alzheimer's disease is characterized in part by the aggregation of tau protein into filamentous inclusions. Because tau filaments form in brain regions associated with memory retention, and because their appearance correlates well with the degree of dementia, they have emerged as robust markers of disease progression. Yet the discovery that mutations in tau protein can lead directly to filament and tangle formation in humans, and that filament formation is linked to neurodegeneration in model biological systems, suggests that tau aggregation may also contribute directly to degeneration in affected neurons. In this context, the mechanism of tau filament formation and its modulation by mutation and posttranslational modification is of fundamental importance. Here, recent progress on the molecular mechanisms underlying tau aggregation deduced from in vivo and in vitro experimentation is reviewed and a model rationalizing the effect of posttranslational and other structural modifications on assembly kinetics and thermodynamics is presented. We hypothesize that tau aggregation can be described as a heterogeneous nucleation reaction, where exogenous effectors, tau gene mutations, or other modifications that stabilize assembly-competent conformations of tau act to trigger the fibrillization reaction. In contrast, those that modulate postnuclear equilibria can enhance fibrillization by increasing the free energy difference between polymers and unincorporated monomers, resulting in stabilization of filaments at low bulk protein concentrations.