This Chapter presents a new physical model for signal processing phenomena (power amplification and frequency selectivity) occurring in the inner ear (Cochlea). It is generally accepted that Outer Hair Cells (OHCs) play a pivotal role in the Cochlear signal processing. In the proposed new model we postulate that all signal processing phenomena in the Cochlea are due to electrical currents flowing in the Cochlea structure. Three crucial characteristics of the OHCs are: 1) a forward mechanoelectrical transduction, 2) a strong piezoelectric effect (direct and inverse), and 3) a transmembrane nonlinear capacitance. The new model postulates existence of a biological electromechanical transistor (EMT) in each of the OHCs (based on a forward mechanoelectrical transduction phenomenon), which enhances the power of an incoming acoustic signal. Consequently, the nonlinear capacitance of the appropriate OHCs is charged (pumped) by an AC current source generated at the output of the proposed EMT transistor. Power amplification and frequency selectivity are realized on the nonlinear capacitance, which constitutes an essential part of a parametric amplifier circuit. The amplified and sharpened in frequency electric signal is then converted to a mechanical signal by the OHCs (inverse piezoelectric effect) and transferred to the Inner Hair Cells that transform this mechanical signal into an output electrical signal supplied to the afferent nerves.