In this paper we discuss the use of laser interferometry with resonant optical cavities to sense very small displacements of suspended test masses in a gravitational radiation detector. In particular we describe and discuss the performance of a prototype interferometer currently under development, which has high finesse cavities, 10-m long, and is illuminated by highly frequency-stabilized light from an argon laser. A displacement sensitivity close to 10^(-16) m/√Hz at kHz frequencies, limited by photon noise in the detected light, is achieved.
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