The examination on the operating mechanism of a pulsating heat pipe (PHP) using visualization revealed that the working fluid in the PHP oscillated to the axial direction by the contraction and expansion of vapor plugs. This contraction and expansion is due to the formation and extinction of bubbles in the evaporating and condensing section, respectively. In this paper, a theoretical model of PHP was presented. The theoretical model was based on the separated flow model with two liquid slugs and three vapor plugs. The results show that the diameter, surface tension and charge ratio of working fluid have significant effects on the performance of the PHP. The following conclusions were obtained. The periodic oscillations of liquid slugs and vapor plugs were obtained under specified parameters. When the hydraulic diameter of the PHP was increased to d=3mm, the frequency of oscillation decreased. By increasing the charging ratio from 40 to 60 by volume ratio, the pressure difference between the evaporating section and condensing section increased, the amplitude of oscillation reduced, and the oscillation frequency decreased. The working fluid with higher surface tension resulted in an increase in the amplitude and frequency of oscillation. Also the average temperature of vapor plugs decreased.