  The sudden release of copious $\g$-ray photons into a compact region creates
an opaque photon--lepton fireball due to the prolific production of
electron--positron pairs. The photons that we observe in the bursts emerge only
at the end of the fireball phase after it expanded sufficiently to become
optically thin or after it converted its energy to the kinetic energy of
relativistic baryons which convert it, in turn, to electromagnetic pulse via
the interaction with interstellar matter. It is essential, therefore, to
analyze the evolution of a fireball in order to comprehend the observed
features of $\gamma$-ray bursts. We discuss various aspects of fireball
hydrodynamics and the resulting emitted spectra.
