I will argue that the circuit architecture of the early olfactory system provides an adaptive, efficient mechanism for compressing the vast space of odor mixtures into the responses of a small number of sensors. In this view, the olfactory sensory repertoire employs a disordered code to compress a high dimensional olfactory space into a low dimensional receptor response space while preserving distance relations between odors. The resulting representation is dynamically adapted to efficiently encode the changing environment of volatile molecules. I will show that this adaptive combinatorial code can be efficiently decoded by systematically eliminating candidate odorants that bind to silent receptors. The resulting algorithm for 'estimation by elimination' can be implemented by a neural network that is remarkably similar to the early olfactory pathway in the brain. Finally, I will discuss how diffuse feedback from the central brain to the bulb, followed by unstructured projections back to the cortex, can produce the convergence and divergence of the cortical representation of odors presented in shared or different contexts. Our theory predicts a relation between the diversity of olfactory receptors and the sparsity of their responses that matches animals from flies to humans. It also predicts specific deficits in olfactory behavior that should result from optogenetic manipulation of the olfactory bulb and cortex, and in some disease states.