We present an analysis of the Internal Shock Model of GRBs, where gamma-rays are produced by internal shocks within a relativistic wind. We show that observed GRB characteristics impose stringent constraints on wind and source parameters. We find that a significant fraction, of order 20%, of the wind kinetic energy can be converted to radiation, provided the distribution of Lorentz factors within the wind has a large variance and provided the minimum Lorentz factor is > Γ ± ≈ 10 2.5 L 2/9 52 , where L = 10 52 L 52 erg s −1 is the wind luminosity. For a high, > 10%, efficiency wind, spectral energy breaks in the 0.1 to 1 MeV range are obtained for sources with dynamical time R/c ∼ < 1 ms, suggesting a possible explanation for the observed clustering of spectral break energies in this range. The lower limit Γ ± to wind Lorenz factor and the upper limit ≈ 1(R/10 7 cm) −5/6 MeV to observed break energies are set by Thomson optical depth due to e ± pairs produced by synchrotron photons. Natural consequences of the model are absence of bursts with peak emission energy significantly exceeding 1 MeV, and existence of low luminosity bursts with low, 1 keV to 10 keV, break energies.Subject headings: gamma-rays: bursts -methods: numerical -radiation mechanisms: non-thermal Both the spectrum and temporal dependence of afterglow emission are consistent with synchrotron emission of electrons accelerated to high energy at the shock wave driven by the