This paper discusses how the Carnot engine led to the formulation of the second law of thermodynamics and entropy. The operation of the engine is analysed both in terms of heat as the caloric fluid and heat as a form of energy. A keystone of Carnot's thinking was the absolute conservation of caloric. Although the Carnot analysis was partly incorrect, Clausius showed that by reinterpreting Carnot's caloric as entropy he was able to formulate the second law. (Contains 1 footnote and 3 figures.)