People live in a constantly changing dynamic environment. Our internal environment is also dynamic and is characterized by biological and mental processes that are in constant flux. Without these changes in both the external and internal environments, life on earth would not exist. The dimension along which all these changes occur is called "time." Without dwelling on its exact nature, "time" can be represented by a clock and is a useful notion that provides a good explanation for physical phenomena in our external environment. Like other organisms, humans must be able to relate to "time" to survive and adjust to the external environment. This presupposes that information about "time" is conveyed and perceived. Since no known human perceptual system is dedicated to "time," subjective temporal experiences are likely to compensate for this lack. Specifically, these subjective experiences may be based on internal changes in events as reflected by internal clocks or memory processes. These changes are monotonically correlated with "time" and thus can provide useful information about its passage. Psychological time is a subjective feeling which is related to the temporal experiences. Nevertheless, psychological time differs from "time," because it is non-linear and because it is dependent on the nature of events occurring within a time period. The correspondence between psychological time and "time," though imperfect, is enough to enable reality testing and normal cognitive and social functioning. This chapter discusses and analyzes psychological time, its functions and nature.