Wood-water interactions are central to the utilization of wood in our society since water affects many important characteristics of wood. This topic has been investigated for more than a century, but new knowledge continues to be generated as a result of improved experimental and computational methods. This review summarizes our current understanding of the fundamentals of water in wood and highlights significant knowledge gaps. Thus, the focus is not only on what is currently known but equally important, what is yet unknown. The review covers locations of water in wood; phase changes and equilibrium states of water in wood; thermodynamics of sorption; terminology including cell wall water (bound water), capillary water (free water), fiber saturation point, and maximum cell wall moisture content; shrinkage and swelling; sorption hysteresis; transport of water in wood; and kinetics of water vapor sorption in the cell wall.