Poly (N-isopropylacrylamide) (PNIPAM) is the premier example of a macromolecule that undergoes a hydrophobic collapse when heated above its lower critical solution temperature (LCST). Here we utilize, dynamic light scattering, H-NMR, steady-state and time-resolved UVRR measurements to determine the molecular mechanism of PNIPAM's hydrophobic collapse. Our steady-state results indicate that in the collapsed state the amide bonds of PNIPAM do not engage in inter-amide hydrogen bonding, but are hydrogen bonded to water molecules. At low temperatures, the amide bonds of PNIPAM are predominantly fully water hydrogen bonded, whereas, in the collapsed state one of the two normal C=O hydrogen bonds is lost. The NH-water hydrogen bonding, however, remains unperturbed by the PNIPAM collapse. Our kinetic results indicate a mono-exponential collapse with τ~360 (±85) ns. The collapse rate indicates a persistence length of n~10. At lengths shorter than the persistence length the polymer acts as an elastic rod, whereas, at lengths longer than the persistence length the polymer backbone conformation forms a random coil. Based on these results we propose that at low temperatures PNIPAM adopts an extended, water-exposed conformation that is stabilized by favorable NIPAM-water solvation shell interactions which stabilize large clusters of water molecules. At elevated temperatures, thermal agitation disrupts these interactions. The PNIPAM+water polymer undergoes a volume phase transition, expels water and shrinks to a compact conformation that reduces its hydrophobic solvent accessible surface area. In this compact state, PNIPAM forms small hydrophobic nano-pockets where the (i, i +3) isopropyl groups make hydrophobic contacts. A persistent length of n~10 suggests a cooperative collapse where hydrophobic interactions between adjacent hydrophobic pockets stabilize the collapsed PNIPAM.