This chapter reviews the basic microphysics governing the formation and growth of the liquid drops and ice crystals that occur in clouds. The various physical processes are examined separately, including nucleation, condensation, evaporation, sublimation, deposition, stochastic collection, continuous collection, coalescence, riming, aggregation, breakup, and secondary ice-particle production. Then these individual processes are combined into water-continuity equations that govern how all the microphysical processes operate together in both warm and cold clouds. Water-continuity equations are presented in both bulk (parameterized) form in which particle-size distributions are assumed and explicit (bin) form in which particle-size distributions are computed. The latest methodologies for formulating the water-continuity equations are included.