  We investigate the relationship between the quasi-thermal baryon-related
photosphere in relativistic outflows, and the internal shocks arising outside
them, which out to a limiting radius may be able to create enough pairs to
extend the optically thick region. Variable gamma-ray light curves are likely
to arise outside this limiting pair-forming shock radius, while X-ray excess
bursts may arise from shocks occurring below it; a possible relation to X-ray
flashes is discussed. This model leads to a simple physical interpretation of
the observational gamma-ray variability-luminosity relation.
