We review current theoretical ideas on pulsar winds and their surrounding
nebulae. Relativistic MHD models of the wind of the aligned rotator, and of the
striped wind, together with models of magnetic dissipation are discussed. It is
shown that the observational signature of this dissipation is likely to be
point-like, rather than extended, and that pulsed emission may be produced. The
possible pulse shapes and polarisation properties are described. Particle
acceleration at the termination shock of the wind is discussed, and it is
argued that two distinct mechanisms must be operating, with the first-order
Fermi mechanism producing the high-energy electrons (above 1 TeV) and either
magnetic annihilation or resonant absorption of ion cyclotron waves responsible
for the 100 MeV to 1 TeV electrons. Finally, MHD models of the morphology of
the nebula are discussed and compared with observation.Comment: 33 pages, to appear in Springer Lecture Notes on "Neutron stars and
pulsars, 40 years after the discovery", ed W.Becke