Recent progress in the use of continuum electrostatics to treat solute‐solvent interactions will be discussed. The new developments are in the spirit of traditional dielectric models in that the solute is treated explicitly while the solvent is treated as a dielectric continuum. Numerical methods now make it possible to describe the solute in atomic detail and consequently to calculate solvation energies as well as charge‐charge interactions. Electronic polarizability can also be incorporated into the treatment. Our approach to the hydrophobic effect considers it as a form of macroscopic surface tension. It is demonstrated that the standard method of extracting solvation free energies from solubility data, which relies on measuring concentrations in mole fractions, is based on an incorrect approximation. A theory which accounts for volume differences between solute and solvent leads to solvation free energies of hydrocarbons which, when analyzed in terms of surface area, yield a microscopic surface tension of about 47 cal/mole/A˚2. Much of the remaining discrepancy with the macroscopic value of 72 cal/mole/A˚2can be accounted for with a simple geometric model which treats local curvature. The availability of macroscopic treatments of both electrostatic and hydrophobic free energies opens up the possibility obtaining total free energies for a large number of solvent dependent phenomena at nominal computational expense.