Spin wave modes in permalloy antidot arrays have been investigated with ferromagnetic resonance at 9.7 GHz. In contrast to a quadratic dispersion expected for exchange standing spin waves, nearly linear relationship exists between the resonance field and mode index, and it can be approximately described by the dipole-dipole and exchange theory. Time-dependent micromagnetic simulations show that the spin wave modes are a result of lateral confinement from the vacant holes. Furthermore, the simulations visually reveal the existence of localized spin waves due to localized boundary conditions in antidots arrays. (C) 2004 American Institute of Physics.