The dentate gyrus (DG) and area CA3 of the hippocampus are highly organized lamellar structures which have been implicated in specific cognitive functions such as pattern separation and pattern completion. Here we describe how the anatomical organization and physiology of the DG and CA3 are consistent with structures that perform pattern separation and completion. We then raise a new idea related to the complex circuitry of the DG and CA3 where CA3 pyramidal cell 'backprojections' play a potentially important role in the sparse firing of granule cells (GCs), considered important in pattern separation. We also propose that GC axons, the mossy fibers, already known for their highly specialized structure, have a dynamic function that imparts variance--'mossy fiber variance'--which is important to pattern separation and completion. Computational modeling is used to show that when a subset of GCs become 'dominant,' one consequence is loss of variance in the activity of mossy fiber axons and a reduction in pattern separation and completion in the model. Empirical data are then provided using an example of 'dominant' GCs--subsets of GCs that develop abnormally and have increased excitability. Notably, these abnormal GCs have been identified in animal models of disease where DG-dependent behaviors are impaired. Together these data provide insight into pattern separation and completion, and suggest that behavioral impairment could arise from dominance of a subset of GCs in the DG-CA3 network.