Cerebrospinal fluid (CSF) serves two main purposes; it acts as a shock absorber to prevent damage to the brain and spinal cord, and (much more interestingly) because it entirely surrounds the brain, it reduces the pressure that the top bits place on the bottom bits, in effect preventing your brain from being squished under its own weight.

The CSF can be found in between the two innermost meninges (the arachnoid membrane and the pia mater) in an area called the subarachnoid space, and filling the ventricles in the brain. CSF is manufactured continuously, and the entire volume (about 125 mL) is replaced every three hours. Similar in chemical makeup to blood plasma, CSF is actually derived from the blood by the choroid plexus, a bit of tissue with a rich blood supply that sticks into all of the ventricles. After circulating from the ventricles into the subarachnoid space, old CSF is reabsorbed through little pouchlike protrusions called arachnoid granulations. From these it moves into the the blood vessels that drain the brain.

The best way to keep the CSF in good shape is by doing all the things that keep your blood in good shape. Most importantly, drink plenty of fluids. Insufficent CSF, or any blockage of the flow of CSF out of the subarachnoid space could result in permanent or even fatal brain damage, in the former case by squishing, in the latter by blocking the flow of blood into the brain.

main source: Physiology of Behavior, 6th edition, 1998. Neil R. Carlson

This is the stuff that carries nutrients, such as proteins, glucose, urea, and salts throughout your CNS. It also serves to protect certain parts of the CNS. It circulates mainly through the four ventricles of your brain, and in the spinal cord's canals. The average human adult has between 80 and 150 ml (3 to 5 oz.) of CSF at any given time. It is clear and colorless, and liquid at room temperature. I believe (unfortunately I can't double check as it's not in my book, I learned this from my doctor), that we produce about 200 cc of CSF per hour. It is formed by filtration and secretion from choriod plexuses, specialized capillaries in the ventricles. It circulates continually. It is gradually absorbed into veins (normally as rapidly as it is formed). An obstruction or inflammation causes CSF to accumulate in the ventricles; this condition is called hydrocephalus and can cause pressure on the brain which results in brain damage. Inserting a shunt into the ventricles to drain off excess fluid is used to treat this condition.
To remove CSF to do a cerebrospinal fluid study is done via a procedure called a spinal tap. A long, thin needle is inserted between the 3rd and 4th lumbar vertabrae, through which CSF can drip. Usually, 3 3 to 4 cc samples are taken, although your doctor may want to take more. Despite popular myth, it doesn't really hurt much (I've had one), and you only have to lay on your back for about an hour afterwards and lie still.


Sources: Introduction to the Human Body: the Essentials of Anatomy and Physiology, 4th ed., along with many, many visits to my neurologist :)
I would add that CSF has many diagnostic uses, and is sometimes extracted for analysis. For example, most of what we know about the role of serotonin shortage in depression comes from looking not at brains (which is hard and destructive), but looking at CSF, which we can assay for 5-HIAA, the main metabolite of 5-HT, or serotonin.

There are persistent rumors that LSD (acid) and MDMA (ecstasy) leave crystals or other residues in the CSF, or otherwise harm or deplete it. These are demonstrably false.

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