In an attempt to examine the effect of arousal on memory, the present study investigated whether the source of arousal had any influence on the incidental memory of a short slide show. Specifically, memory of arousing content was compared to memory of material while in an arousing emotional state. A total of 104 volunteers were randomly assigned to one of four experimental groups. All groups watched the same 11 slides but heard either an arousing or neutral version of the story accompanying the slide show. Furthermore, half of the subjects were exposed to background sounds that were either arousing in nature or neutral while watching the neutral version of the slide show. Subjects' memory was tested either immediately following the slide show or after a one-week delay. The memory test consisted of both a free recall task and a multiple-choice recognition test. The free recall task was closely examined for gist, central and background detail, erroneous substitutions, fictional additions and attributions. Being exposed to arousing background sounds consistently impaired memory more significantly than exposure to neutral background sounds. Viewing the arousing story did improve memory on the free recall task for gist and background details, especially when the retention interval was delayed. However, this group also made consistently more errors in their recall as well, especially after a delay. A capacity for imagery and imaginative thinking (as measured by the Individual Differences Questionnaire) was found to reliably predict the number of memory intrusions (i.e., errors and attributions) subjects made in their recall. Implications for eyewitness testimony and memory for traumatic events are discussed.