Hippocampus is a seahorse shaped paired structure, with one hippocampi located in each hemisphere of the brain. It is located within the temporal lobes, adjacent to the amygdala, under the cerebral cortex and contains two main interlocking parts: Ammon's horn and dentate gyrus.

Functions of Hippocampus include:

1.    Inhibition: The behavioral inhibition theory postulates that Hippocampus plays a role in controlling emotional response. Ex: damage to Hippocampus could make a person hyperactive; they may have difficulty learning to inhibit responses.
2.    Memory: Hippocampus plays an important role in the formation of new memories about experienced events (episodic or autobiographical memory). Part of this function is the detection of novel events, places and stimuli.
3.    Navigation and Spatial orientation: Hippocampus acts as a cognitive map—a neural representation of the layout of the environment. Without a fully functional hippocampus, humans may not remember where they have been and how to get where they are going.

Brain imaging shows that people have more active hippocampi when correctly navigating.  It also plays a role in finding shortcuts and new routes between familiar places.

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Sources:
http://biology.about.com/od/anatomy/p/hippocampus.htm
https://en.wikipedia.org/?title=Hippocampus

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