Consciousness develops from birth during the early months as the senses and other nervous system functions mature sufficiently to receive, process and store information. Among these is the ascending reticular activating (arousal) system in the brain stem that is responsible for wakefulness and was proposed by Penfield and Jasper more than 50 years ago as the "controlling mechanism for states of consciousness". This concept has remained the most advanced physiological interpretation of consciousness although recent developments offer greater insights into its nature. The ascending arousal system is the source of activation of the thalamocortical and cortical mechanisms for sensory input and facilitates the rapid matching of sensory input and the binding of memory during cognitive processing. Nonetheless, it is proposed that memory is the critical element through which our connection with the world exists without which, despite a fully functional arousal system, consciousness as we know it could not exist. Evidence is presented in support of this concept in addition to the physiological difficulties that must be resolved if consciousness is to be understood.