Magnetoencephalography (MEG) is a non-invasive functional imaging modality based on the measurement of the external magnetic field produced by neural current sources within the brain. The reconstruction of the underlying sources is a severely ill-posed inverse problem typically tackled using either low-dimensional parametric source models, such as an equivalent current dipole (ECD), or high-dimensional minimum-norm imaging techniques. The inability of the ECD to properly represent non-focal sources and the over-smoothed solutions obtained by minimum-norm methods underline the need for an alternative approach. Multipole expansion methods have the advantages of the parametric approach while at the same time adequately describing sources with significant spatial extent and arbitrary activation patterns. In this paper we first present a comparative review of spherical harmonic and Cartesian multipole expansion methods that can be used in MEG. The equations are given for the general case of arbitrary conductors and realistic sensor configurations and also for the special cases of spherically symmetric conductors and radially oriented sensors. We then report the results of computer simulations used to investigate the ability of a first-order multipole model (dipole and quadrupole) to represent spatially extended sources, which are simulated by 2D and 3D clusters of elemental dipoles. The overall field of a cluster is analysed using singular value decomposition and compared to the unit fields of a multipole, centred in the middle of the cluster, using subspace correlation metrics. Our results demonstrate the superior utility of the multipolar source model over ECD models in providing source representations of extended regions of activity.