  We obtained high dispersion spectra of CI Cam, the optical counterpart of XTE
J0421+560, two weeks after the peak of its short outburst in 1998 April. The
optical counterpart is a supergiant B[e] star emitting a two-component wind.
The cool wind (the source of narrow emission lines of neutral and ionized
metals) has a velocity of 32 km/s and a temperature near 8000 K. Dense and
roughly spherical, it fills the space around the sgB[e] star, and, based on the
size of an infrared-emitting dust shell around the system, extends to a radius
between 13 - 50 AU. It carries away mass at a high rate, Mdot > 10^(-6) solar
masses per year. The hot wind has a velocity in excess of 2500 km/s and a
temperature of 1.7 +/-0.3 x 10^4 K. From UV spectra of CI Cam obtained in 2000
March with Hubble Space Telescope, we derive a differential extinction E(B-V) =
0.85 +/- 0.05. We derive a distance to CI Cam > 5 kpc. Based on this revised
distance, the X-ray luminosity at the peak of the outburst was L(2-25 keV) >
3.0 x 10^38 erg/s, making CI Cam one of the most luminous X-ray transients. The
ratio of quiescent to peak luminosity in the 2 - 25 keV band is < 1.7 x
10^(-6). The compact star in CI Cam is immersed in the dense circumstellar wind
from the sgB[e] star and burrows through the wind producing little X-ray
emission except for rare transient outbursts. This picture (a compact star
traveling in a wide orbit through the dense circumstellar envelope of a sgB[e]
star, occasionally producing transient X-ray outbursts) makes CI Cam unique
among the known X-ray binaries. Strong circumstantial evidence suggests that
the compact object is a black hole, not a neutron star. We speculate that the
X-ray outburst was short because the accretion disk around the compact star is
fed from a stellar wind and is smaller than disks fed by Roche-lobe overflow.
