  Multiresolution analyses based upon interpolets, interpolating scaling
functions introduced by Deslauriers and Dubuc, are particularly well-suited to
physical applications because they allow exact recovery of the multiresolution
representation of a function from its sample values on a finite set of points
in space. We present a detailed study of the application of wavelet concepts to
physical problems expressed in such bases. The manuscript describes algorithms
for the associated transforms which, for properly constructed grids of variable
resolution, compute correctly without having to introduce extra grid points. We
demonstrate that for the application of local homogeneous operators in such
bases, the non-standard multiply of Beylkin, Coifman and Rokhlin also proceeds
exactly for inhomogeneous grids of appropriate form. To obtain less stringent
conditions on the grids, we generalize the non-standard multiply so that
communication may proceed between non-adjacent levels. The manuscript concludes
with timing comparisons against naive algorithms and an illustration of the
scale-independence of the convergence rate of the conjugate gradient solution
of Poisson's equation using a simple preconditioning, suggesting that this
approach leads to an O(n) solution of this equation.
