The modern system by which the odds, or "line," and the payoff among bettors are determined is called parimutuel betting. In a parimutuel horse betting system, all of the bets of a similar type are pooled together. The house then takes a cut off of the top for taxes, profit, and the purse, leaving the remainder to be divided in the prize pool according to payoff odds.

The parimutuel system of horse betting came into existence because bookmakers found it difficult to assure themselves steady profits while being fair to their customers. In 1865, a Parisian named Pierre Oller was given the task by a friend of his to create a system that would overcome the challenges faces by bookmakers. The result was a system that required heavy calculations but was a big success.

Oller's model for calculating horse betting came into widespread use, and within a short time was predominant. It allowed for a new level of confidence and stability in horse betting, both for the bookmaker and the bettor. One early drawback was the level of calculation required for the system, but modern innovations soon overcame this minor impediment.

As early as 1913, a special automated calculation machine called a totalisator made its debut in New Zealand, though one was not made in the United States until 1933. In 1966, the first electronic totalisator came into existence, ushering in the computer era in horse betting. To take advantage of the latest innovations in horse betting, be sure to visit VIPhorses.com, the premiere site for horse racing information and wagering.