In an effort to define narrative ads clearly, this chapter distinguishes newly developed, innovative forms of narrative-based promotion from traditional narrative ads. In addition to comparing narrative and analytical processing of advertisements, it identifies four factors that encourage a narrative mode of processing: sources, specific advertising executions, individual differences, and contexts. Next, this chapter addresses several important functions of narrative-based promotion for both advertisers and consumers. Finally, it explains how people understand narrative ads and illustrates how narrative processing works by specifying two unique cognitive processes, mental simulation and being transported, and the accompanying affective responses. These cognitive and affective processes have key functions in terms of enhancing advertising persuasion. The chapter ends with a summary of implications for practitioners.