Genetically encoded calcium indicators (GECIs), based on recombinant fluorescent proteins, have been engineered to observe calcium transients in living cells and organisms. Through observation of calcium, these indicators also report neural activity. We review progress in GECI construction and application, particularly toward in vivo monitoring of sparse action potentials (APs). We summarize the extrinsic and intrinsic factors that influence GECI performance. A simple model of GECI response to AP firing demonstrates the relative significance of these factors. We recommend a standardized protocol for evaluating GECIs in a physiologically relevant context. A potential method of simultaneous optical control and recording of neuronal circuits is presented.