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With life expectancy increasing continuously, the effects of neurodegeneration on brain function are a topic of ever increasing importance. Thus there is a need for tools and models that probe both the functional consequences of neurodegenerative processes and compensatory mechanisms that might occur. As neurodegenerative burden and compensatory mechanisms may change over time, these tools will ideally be applied multiple times over the lifespan. Specifically, in order to elucidate whether brain-activation patterns in Alzheimer's disease (AD) and in healthy aging follow general rules in the context of degeneration and compensation, it is necessary to compare functional brain-activation patterns during different states of neurodegeneration. This article integrates the findings of functional activation studies at different stages of neurodegeneration: in healthy aging, in subjects at high risk of developing dementia, in subjects with mild cognitive impairment (MCI), and in patients suffering from AD. We review existing theoretical models that aim to explain the underlying mechanisms of functional activation changes in aging and dementia, and we propose an integrative account, which allows for different neural response patterns depending on the amount of neuronal damage and the recruitment of compensatory pathways.