ATP-gated P2X receptors are trimeric ion channels selective to cations. Recent progress in the molecular biophysics of these channels enables a better understanding of their function. In particular, data obtained from biochemical, electrophysiogical and molecular engineering in the light of recent X-ray structures now allow delineation of the principles of ligand binding, channel opening and allosteric modulation. However, although a picture emerges as to how ATP triggers channel opening, there are a number of intriguing questions that remain to be answered, in particular how the pore itself opens in response to ATP and how the intracellular domain, for which structural information is limited, moves during activation. In this review, we provide a summary of functional studies in the context of the post-structure era, aiming to clarify our understanding of the way in which P2X receptors function in response to ATP binding, as well as the mechanism by which allosteric modulators are able to regulate receptor function.