Hydration of Nafion is known to profoundly effect its performance, however, measurements of hydration and its modeling and relation to other characteristics have been subject to puzzling controversies such as Schroeder's paradox. This chapter analyzes Nafion hydration based on a new model that consistently relates hydration to microstructure. The hydration equilibrium is interpreted as a balance of 3 pressures: osmotic, elastic and a special interfacial-elastic Laplace pressure, which clarifies the role of relaxation and the origin of non-equilibrium phenomena such as Schroeder's paradox. The predicted structural variation of microstructure with hydration shows a good agreement with available data. The model is also used to analyze microstructure and orientation of Nafion micelles in the surface region exposed to different environments. The predicted variations of surface structure in vapor and water fully agree with GISAXS, AFM and contact angle measurements for Nafion membranes and thin films on different substrates. The external medium and substrate are shown to strongly affect the orientation of micelles in their vicinity. This suggests attractive possibilities of enhancing transport characteristics of Nafion.