Published online by Cambridge University Press: 25 May 2016
I review radiative processes responsible for X-ray emission in the hard (low) and soft (high) spectral states of black-hole binaries. The main process in the hard state appears to be thermal Comptonization (in a hot plasma) of blackbody photons emitted by a cold disk. This is supported by correlations between the spectral index, the strength of Compton reflection, and the peak frequencies in the power-density spectrum, as well as by the frequency-dependence of Fourier-resolved spectra. Spectral variability may then be driven by the variable truncation radius of the disk. The soft state appears to correspond to the smallest truncation radii. However, the lack of high-energy cutoffs observed in the soft state implies that its main radiative process is Compton scattering of disk photons by nonthermal electrons. The bulk-motion Comptonization model for the soft state is shown to be ruled out by the data.