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The olfactory epithelium is an area inside the nose which is responsible for intercepting odors and passing them on to the brain. The mechanics of the olfactory epithelium are not fully understood; this structure contains a huge number of neurons, but the exact way in which they interact with and distinguish between smells is a bit of a mystery. The larger the area covered by the olfactory epithelium, the more neurons, and the better the sense of smell.
Like other layers of epithelial tissue in the body, the olfactory epithelium contains a number of layers of cells. These cells include specialized neurons which communicate with the olfactory bulb via long axons, and olfactory hair cells which have highly sensitive receptors which pick up odors. The olfactory epithelium is also quite delicate, and it can be damaged by exposure to chemicals, strong odors, and head injuries.
The olfactory epithelium is located inside the back of the nose. As people breathe in through the nose, fine hairs and mucus near the opening of the nose trap particles which could be harmful, and the rest of the air passes over the olfactory epithelium. The neurons in the epithelium respond to specific odors and send a signal to the brain to tell it what the nose knows. Essentially, the olfactory epithelium is like a laboratory: when people are exposed to odors, they don't smell them instantly, but rather wait for them to be processed and for their brains to return the results.
Different animals have varying degrees of sensitivity to smell. Animals rely on their olfactory epithelium to alert them to the presence of predators, potential food sources, or contamination which could make food or water dangerous to consume. Certain odors appear to trigger stronger responses than others; sour milk, for example, is often very easy to detect, because it can be dangerous to drink, while people and animals are less sensitive to more benign odors.
Some people can train themselves to have an excellent sense of smell, a skill achieved in part with the olfactory epithelium someone was born with, and in part with patient training. Wine experts, for example, may smell wines while blindfolded to learn to identify specific scents, and perfume “noses” use similar techniques in their training. People who rely on their sense of smell for a living also take steps to protect it, such as avoiding harsh chemicals and strong odors.
Damage resulting in loss of odor sensitivity isn't just unfortunate because people can't stop and smell the roses any more. Anosmia, as the loss of the sense of smell is known, can actually be quite dangerous, because people miss important cues to danger, such as the smell of a gas leak, when they can't smell.