Under high wind speed conditions breaking waves disrupt the air-sea interface producing a two-phase zone—air bubbles in water and sea spray in air. This mixed-phase environment changes the regime of air-sea interaction. In this chapter, after reviewing dynamics of air-bubbles and sea spray droplets in detail, the reader is exposed to the idea that under strong winds Kelvin-Helmholtz instability is the likely mechanism for the intense production of spume and formation of a two-phase transition layer. The resulting two-phase environment eliminates short wind-waves, including some responsible for a substantial part of the surface wind stress. Amazingly, this concept provides an explanation for the rapid intensification of some storms to major tropical cyclones and observed bi-modal distribution of tropical cyclone maximum intensity. A long overdue implementation of sea surface micro-physics into operational models is expected to improve predictions of tropical cyclone intensity and the associated wave field.