This paper reviews hierarchical observation models, used in functional neuroimaging, in a Bayesian light. It emphasizes the common ground shared by classical and Bayesian methods to show that conventional analyses of neuroimaging data can be usefully extended within an empirical Bayesian framework. In particular we formulate the procedures used in conventional data analysis in terms of hierarchical linear models and establish a connection between classical inference and parametric empirical Bayes (PEB) through covariance component estimation. This estimation is based on an expectation maximization or EM algorithm. The key point is that hierarchical models not only provide for appropriate inference at the highest level but that one can revis...