  The blast-wave model for gamma-ray bursts (GRBs) has been called into
question by observations of spectra from GRBs that are harder than can be
produced through optically thin synchrotron emission. If GRBs originate from
the collapse of massive stars, then circumstellar clouds near burst sources
will be illuminated by intense gamma radiation, and the electrons in these
clouds will be rapidly scattered to energies as large as several hundred keV.
Low-energy photons that subsequently pass through the hot plasma will be
scattered to higher energies, hardening the intrisic spectrum. This effect
resolves the "line-of-death" objection to the synchrotron shock model.
Illuminated clouds near GRBs will form relativistic plasmas containing large
numbers of electron-positron pairs that can be detected within ~ 1-2 days of
the explosion before expanding and dissipating. Localized regions of pair
annihilation radiation in the Galaxy would reveal past GRB explosions.
