This article explains implied volatility (IV) and how it can differ from the market's true expectation of uncertainty. It also estimates IV of 3-month eurodollar interest rates from 1985 to 2001 and evaluates its ability to predict realized volatility. IV shows that uncertainty about short-term interest rates has been falling for almost 20 years, as the levels of interest rates and inflation have fallen; and changes in IV are usually coincident with major news about the stock market, the real economy, and monetary policy.