A central assumption in psychoanalysis is that unconscious mental states can become conscious. Yet Freud never offered a fully systematic account of the mechanism underlying this transformation. This paper distinguishes between two competing interpretations of Freud's theory: the perception theory, according to which unconscious states become conscious through inner perception, and the activation theory, according to which unconscious states become conscious through functional transformation involving spreading activation and integration with linguistic and cortical processes. It is argued that the activation theory provides a more plausible and coherent interpretation of Freud's views. It better accounts for the causal efficacy of consciousness emphasized in psychoanalytic therapy and aligns more closely with Freud's remarks about functional change, innervation, and the relation between thing-presentations and word-presentations. The perception theory is retained as a useful heuristic metaphor, but not as an accurate theoretical model. Finally, the activation theory is briefly shown to anticipate certain contemporary cognitive scientific approaches to consciousness.