In this paper we discuss the role of context in interpreting and understanding perceived events as actions carried out by other people. The context is defined both as temporal (relations between events) and as being comprised of the state of the situation as cognitively processed (object properties) at any given time. We begin by presenting this overlooked field through previous work and perceived action models in psychology and in artificial intelligence. We will argue that the principal mechanism involved in perceiving action is categorisation of the objects in the environment (environmental context) and of the temporal relations between events (temporal context). The mechanisms involved in this process are modelled using the Dynamic Allocation of Meaning Model (C.A.D.S.). This model proposes an explanation of the manner in which temporal information and the perceived properties of a situation interact.