The affine Kac-Moody algebra $A_1^{(1)}$ has recently served as a source of new ideas in the representation theory of infinite-dimensional affine Lie algebras. In particular, several years ago it was discovered that $A_1^{(1)}$ and then a general class of affine Lie algebras could be constructed using operators related to the vertex operators of the physicists' string model. This book develops the calculus of vertex operators to solve the problem of constructing all the standard $A_1^{(1)}$-modules in the homogeneous realization. Aimed primarily at researchers in and students of Lie theory, the book's detailed and concrete exposition makes it accessible and illuminating even to relative newcomers to the field.