Lag-zero regression of Eulerian mean meridional circulation with respect to the annular-mode index of surface pressure demonstrates that this circulation opposes the mean-flow anomaly in the upper troposphere and stratosphere, implying that eddy fluxes are responsible for maintenance of the annular mode, as first suggested by Thompson and Wallace. The sense of induced circulation responsible for the transport of mass is nevertheless consistent with the surface pressure anomaly over the polar cap. This 'static' picture of annular-mode anomalies of mean flow, induced circulation and surface pressure -- with troposphere and stratosphere apparently acting in concert -- can be uniquely explained by eddy momentum fluxes. More detailed examination of observations and model simulations demonstrates a richer spectrum of annular-mode behavior variously characterized by in-phase, delayed, and out-of-phase relationships between tropospheric and stratospheric anomalies. An out-of-phase relationship is uniquely explained by eddy heat fluxes, representing a flux of wave activity from troposphere to stratosphere, or vice versa. According to the theorem of Charney and Drazin, vertical fluxes of wave activity into the stratospheric polar vortex are limited to the gravest zonal wavenumbers of planetary scale. On the other hand, synoptic-scale waves contribute significantly to the horizontal flux of wave activity in the troposphere. The role of synoptic-scale waves in amplifying and maintaining the tropospheric annular-mode anomaly is discussed. At times when anomalies in the troposphere and stratosphere are coupled via planetary-wave propagation, as in winter, the synoptic-scale waves may play an important, if not essential, role in producing the predominant 'in-phase' relationship of anomalies in the two layers.