The structure of, and anisotropic thermal motions in, the red semiconductor tetrahedral layer structure of HgI(2) have been studied with neutron powder diffraction as a function of temperature from 10 to 293 K. Average thermal displacement parameters U(eq) of the two atoms are comparable in size at 10 K, but U(eq)(Hg) increases considerably faster with temperature than U(eq)(I), the Hg-I bond being highly non-rigid. The anisotropic displacement tensor U(I) is strongly anisotropic with one term about twice as large as the others, while U(Hg) is nearly isotropic. All displacement tensor elements, except U(22)(I), increase faster with temperature than harmonic quantum oscillator curves indicating a softening of the isolated-atom potentials at large amplitudes. A lattice dynamical model provides arguments that the anisotropic thermal motions of I are dominated by a soft mode with a wavevector at the [(1/2) (1/2) 0] boundary of the Brillouin zone consisting essentially of coupled librations of the HgI(4) tetrahedra, and by translations of the entire layer. The large vibration amplitudes of Hg suggest weak Hg-I force constants compared with the I-I force constants, allowing Hg to move quite freely inside the tetrahedra. The libration mode induces dynamic deformations of the Hg-I bond with twice its frequency. This provides a mechanism for the anharmonicity and may explain the lightening of the color from red to orange upon cooling at ca 80 K.