Cilia and flagella are closely related centriole-nucleated protrusions of the cell with roles in motility and signal transduction. Two of the best-studied signalling pathways organized by cilia are the transduction cascade for the morphogen Hedgehog in vertebrates and the mating pathway that initiates gamete fusion in the unicellular green alga Chlamydomonas reinhardtii. What is the role of cilia in these signalling transduction cascades? In both Hedgehog and mating pathways, all signalling intermediates have been found to localize to cilia, and, for some signalling factors, ciliary localization is regulated by pathway activation. Given a concentration factor of three orders of magnitude provided by translocating a protein into the cilium, the compartment model proposes that cilia act as miniaturized reaction tubes bringing signalling factors and processing enzymes in close proximity. On the other hand, the scaffolding model views the intraflagellar transport machinery, whose primary function is to build cilia and flagella, as a molecular scaffold for the mating transduction cascade at the flagellar membrane. While these models may coexist, it is hoped that a precise understanding of the mechanisms that govern signalling inside cilia will provide a satisfying answer to the question 'how do cilia organize signalling?'. This review covers the evidence supporting each model of signalling and outlines future directions that may address which model applies in given biological settings.