We have examined language processing using ambiguous words (homographs like panel or toast) and rapid or slow presentation rates while recording event-related brain potentials (ERPs). Homographs allow for tracking the train of thought at points of lexical ambiguity and detecting modulation of associative threads by previous context. Rapid presentation rates stress automatic semantic activation, and slow rates stress controlled verbal working memory contextual modulation. In conjunction with reaction times and performance, ERPs allow for objective measurement of activity related to language processing from word presentation through overt behavioral response. Smaller N400 to related and unrelated items at short stimulus onset asynchronies (SOAs), the presence of a semantic bias, and large N400 to related and unrelated items at long SOAs are present in schizophrenia. We describe a model of initial semantic memory hyper-priming and subsequent decay of information in verbal working memory stores, the activation-maintenance model of schizophrenic thought disorder hypothesized to underlie the thought disorder in schizophrenia.