AN ACR FLC FLYING A B737-300 ACFT DEVIATED FROM THEIR ASSIGNED ALT.

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FLT CONDITIONS: CRUISE; FL310; AUTOPLT ENGAGED; SEAT BELT SIGN 'ON.' APPROX 30 NM E OF ALS VOR WE ENCOUNTERED A SUDDEN ONSET OF LIGHT; ALMOST MODERATE TURB. AS I DISENGAGED THE VNAV TO SELECT A SLOWER AIRSPD I HEARD THE ALT ALERT HORN. CHKING THE ALTIMETER; I NOTICED THAT WE WERE 400 FT BELOW FL310 AND DSNDING AT LEAST 4000 FPM! I DISENGAGED THE AUTOPLT AND STOPPED THE DSCNT THEN FLEW THE AIRPLANE BACK TO FL310 BEFORE RE-ENGAGING THE AUTOPLT. THE MAX ALTDEV WAS 700 FT BELOW FL310. I HAD THE FO RPT THE EVENT TO ZDV AND WE WERE ADVISED THAT THERE HAD BEEN NO CONFLICT. ARTCC THANKED US FOR THE PIREP. THERE WERE NO INJURIES IN THE CABIN. I BELIEVE THAT WE ENCOUNTERED A 'ROTOR;' AS THE REACTION OF THE AIRPLANE WAS NOT CONSISTENT WITH MOUNTAIN WAVE ACTIVITY. THERE IS NOT MUCH THAT CAN BE DONE TO PREVENT THIS TYPE OF ALTDEV. THERE WAS A STRONG WESTERLY FLOW OVER THE ROCKIES THAT DAY. MOUNTAIN WAVE ACTIVITY I DID EXPECT BUT A 'DOWNDRAFT' OF THIS MAGNITUDE I DID NOT EXPECT AND HAVE NEVER EXPERIENCED ANYTHING LIKE IT AT FLT LEVEL ALTS IN 22+ YRS OF AIRLINE FLYING.