Holograms work by diffraction. A diffraction grating comprises a surface of regularly spaced parallel strips which are alternately opaque and transparent. Since light is a wave, semicircular ripples spread from each transparent strip and combine to give a diffracted wave whose direction is different from the original. The direction of the diffracted wave depends on the width of the strips, and its intensity on the opacity of the opaque strips.

In order to display a hologram on a liquid crystal display, it should be illuminated with the image of a point source of light, i.e. with rays of light which converge to a point. Many diffraction gratings can then be written on the screen, and by varying the position, periodicity and opacity of the gratings a holographic 3D image can be displayed.

Liquid crystal layers are rarely thinner than 1.5 microns, so it is difficult to make pixels smaller than 5 microns. This is about 10 wavelengths of light, so gratings rarely deflect light by more than 1/10th of a radian (~6 degrees). In order to get a holographic image with a wide field of view, several holograms of the 3D object should be displayed in turn on the liquid crystal display, and each illuminated by a different point source of light.

Holographic 3D may be good for small portable displays. But the problem with holographic 3D for larger screens is that powerful computers are needed to calculate the holograms, and sometimes there is no need for the high resolution which they offer.