Due to the continued growth of the Internet and the introduction of new broadband services, it is anticipated that individual channel data rates may exceed lOOGbit/s in the next 5-10 years. In order to operate at such high line rates new techniques for optical pulse generation and optical signal processing will have to be developed. As the overall data rate of an OTDM network is essentially determined by the temporal separation between data channels, an optical pulse source that is capable of producing ultra-short optical pulses at a high repetition rate and with wavelength tunability will be important, not only for OTDM, but for vanous applications in WDM and hybrid WDM/OTDM networks. This work demonstrates that by using the gain-switching technique, commercially available laser diodes can be used in the development of nearly transform-limited optical pulses that are wavelength tunable over nearly 65nm with durations ranging from 12-30ps and a Side-Mode Suppression Ratio (SMSR) exceeding 60dB. New optical signal processing techniques will also have to be developed in order to operate at individual data rates in excess of lOOGbit/s. Only nonlinear optical effects, present in fibres, semiconductors and optical crystals, can be employed as these occur on time scales in the order of a few-femtoseconds (10“15 5), with an example being Two-Photon Absorption (TPA) in semiconductors. This thesis describes a specially designed microcavity that can enhance the Two-Photon Absorption (TPA) response by over three orders of magnitude at specific wavelengths. A theoretical model demonstrating error-free demultiplexing of a 250Gbit/s OTDM signal via a TPA microcavity has been developed. Experimental work is also presented demonstrating the use of a TPA microcavity for optical sampling of 100GHz signals with a temporal resolution of 1 ps9 and system sensitivity of 0 009 (mW)2 This value for the sensitivity is the lowest ever reported for a TPA-based sampling system.