It is an interaction between some special kind of molecule with water through
which the molecules try to reduce its interface with water.
It can be highly useful to make water as an useful solvent in doing organic reaction instead of dangerous organic solvents.If we put two nonpolar (hydrophobic) reactants on water or dissolve it anyhow(though in a very small amount) in water the organic reactants due to hydrophobic interaction
try to come closer to follow subsequent reaction. It is thought that strong hydrogen bonding network of water plays an important role in this type of reaction............ green chemistry is ushering in the picture...