Several models of spoken word recognition postulate that recognition is achieved via a process of competition between lexical hypotheses. Competition not only provides a mechanism for isolated word recognition, it also assists in continuous speech recognition, since it offers a means of segmenting continuous input into individual words. We present statistics on the pattern of occurrence of words embedded in the polysyllabic words of the English vocabulary, showing that an overwhelming majority (84%) of polysyllables have shorter words embedded within them. Positional analyses show that these embeddings are most common at the onsets of the longer word. Although both phonological and syntactic constraints could rule out some embedded words, they do not remove the problem. Lexical competition provides a means of dealing with lexical embedding. It is also supported by a growing body of experimental evidence. We present results which indicate that competition operates both between word candidates that begin at the same point in the input and candidates that begin at different points (McQueen, Norris, & Cutler, 1994, Noms, McQueen, & Cutler, in press). We conclude that lexical competition is an essential component in models of continuous speech recognition.