A dynamic theory that connects electronic motions and the nonlinear optical response of conjugated polyenes is developed by introducing the concept of electronic normal modes. A useful picture for the mechanism of optical nonlinearities is obtained by identifying the few dominant modes. This quasi-particle electron-hole representation establishes a close analogy with small semiconductor particles (quantum dots) and is very different from the traditional approach based on electronic eigenstates. The effective conjugation length (coherence size), which controls the scaling and saturation of the static third-order susceptibility chi((3)) with the number of double bonds, is related to the coherence of the relative motion of electron-hole pairs created upon optical excitation.