Cholesterol is the single most abundant molecule in animal plasma membranes, in the range of 20-30. mol%, where it is known to modulate the lipid-bilayer component of the membrane and lead to increased mechanical stability, lower permeability, larger thickness, and a distinct lateral organization. The phase equilibria of membranes with cholesterol and the associated large- and small-scale structure have turned out to be a particularly elusive problem. With the proposal that lipid domains and so-called 'rafts', characterized by high local levels of cholesterol in a liquid-ordered phase, are important for a wide range of cellular functions, an understanding and a quantitative assessment of the nature of these cholesterol-induced structures and their types of ordering have become urgent. Recent progress in neutron diffraction studies of lipid-cholesterol model membranes has now revealed details of the lateral ordering, and combined with earlier molecular model studies a picture emerges of the membrane as a locally structured liquid with small ordered 'domains' of a highly dynamic nature.