(BOLD) In MRI the changes in blood oxygenation level are visible. Oxyhaemoglobin (the principal haemoglobin in arterial blood) has no substantial magnetic properties, but deoxyhaemoglobin (present in the draining veins after the oxygen has been unloaded in the tissues) is strongly paramagnetic. It can thus serve as an intrinsic paramagnetic contrast agent in appropriately performed brain MRI. The concentration and relaxation properties of deoxyhaemoglobin make it a susceptibility , e.g. T2 relaxation effective contrast agent with little effect on T1 relaxation.
During activation of the brain, the oxygen consumption of the local tissue increase by approximately 5% with that the oxygen tension will decrease. As a consequence, after a short period of time vasodilatation occurs, resulting in a local increase of blood volume and flow by 20 - 40%. The incommensurate change in local blood flow and oxygen extraction increases the local oxygen level.
By using T2 weighted gradient echo EPI sequences, which are highly susceptibility sensitive and fast enough to capture the three-dimensional nature of activated brain areas will show an increase in signal intensity as oxyhaemoglobin is diamagnetic and deoxyhaemoglobin is paramagnetic. Other MR pulse sequences, such as spoiled gradient echo pulse sequences are also used.
As the effects are subtle and of the order of 2% in 1.5 T MR imaging, sophisticated methodology, paradigms and data analysis techniques have to be used to consistently demonstrate the effect.
As the BOLD effect is due to the deoxygenated blood in the draining veins, the spatial localization of the region where there is increased blood flow resulting in decreased oxygen extraction is not as precisely defined as the morphological features in MRI. Rather there is a physiological blurring, and is estimated that the linear dimensions of the physiological spatial resolution of the BOLD phenomenon are around 3 mm at best.

MR imaging techniques capable to provide maps of cerebral activity. All these techniques are based on indirect assessment of local cerebral haemodynamics that have been demonstrated to be closely related to cerebral activity.
Two kinds of techniques have been developed:

(fMRI) Functional magnetic resonance imaging is a technique used to determine the dynamic brain function, often based on echo planar imaging, but can also be performed by using contrast agents and observing their first pass effects through brain tissue. Functional magnetic resonance imaging allows insights in a dysfunctional brain as well as into the basic workings of the brain.
The in functional brain MRI most frequently used effect to assess brain function is the blood oxygenation level dependent contrast (BOLD) effect, in which differential changes in brain perfusion and their resultant effect on the regional distribution of oxy- to deoxyhaemoglobin are observable because of the different 'intrinsic contrast media' effects of the two haemoglobin forms. Increased brain activity causes an increased demand for oxygen, and the vascular system actually overcompensates for this, increasing the amount of oxygenated haemoglobin. Because deoxygenated haemoglobin attenuates the MR signal, the vascular response leads to a signal increase that is related to the neural activity.
Functional imaging relates body function or thought to specific locations where the neural activity is taking place. The brain is scanned at low resolution but at a fast rate (typically once every 2-3 seconds). Structural MRI together with fMRI provides an anatomical baseline and best spatial resolution.
Interactions can also be seen from the motor cortex to the cerebellum or basal ganglia in the case of a movement disorder such as ataxia. For example: by a finger movement the briefly increase in the blood circulation of the appropriate part of the brain controlling that movement, can be measured.

(Hb) Haemoglobin is the major endogenous oxygen-binding molecule, responsible for binding oxygen in the lung and transporting it to the tissues by means of the circulation. Haemoglobin is contained in very high concentration in the red blood cells.
Haemoglobin is an Fe chelate tightly binding one Fe ion in its II oxidation state where it carries the charge 2+ (ferrous iron). If an oxygen molecule is bound to Hb, Hb is called oxyhaemoglobin, if no oxygen molecule is bound it is called deoxyhaemoglobin. When haemoglobin is oxidized (i.e. in a haematoma), Fe2+ is transformed into Fe3+. The resulting haemoglobin is then called metoxyhaemoglobin (Hb Fe3+).
Deoxyhaemoglobin and metoxyhaemoglobin act as paramagnetic contrast agents in MR, while oxyhaemoglobin is diamagnetic. This partly explains the special appearance of an aging haematoma in MR imaging and is also the basic of the blood oxygenation level dependent contrast (BOLD) used in functional magnetic resonance imaging of the brain (fMRI).

After a bleeding, blood goes through several transitions regarding magnetic properties, intra- and extracellular distribution and content of proteins and water. Oxyhaemoglobin is degraded to deoxyhaemoglobin and further to methaemoglobin, ferritin and haemosiderin. These molecules can be characterized by their magnetic susceptibility effect. Oxyhaemoglobin is diamagnetic with no practical influence on the magnetic field. All degradation products are paramagnetic (deoxyhaemoglobin, methaemoglobin) or even superparamagnetic (ferritin, haemosiderin).

See also Haemoglobin, Blood Oxygenation Level Dependent Contrast.