We discuss mechanisms that have been proposed for film formation from latex systems and point out that major problems exist, in that the relative role played by the water/air, the polymer/air, and the polymerwater interfacial tensions in promoting film formation has not been established. Even the relative role played by "plasticization" of latex polymers by water has remained as an unanswered question. In order to clarify this problem, we have investigated the rate of film formation of "wet" and "dry" latex systems by atomic force microscopy. The role of the water surface tension (in creating a "capillary pressure") was clearly revealed by forming a "wet" latex system through condensation of water into the interstitial space of initially dry latex particles. Poly(iso-butyl methacrylate) (PiBMA) was used as the model latex because of its appropriate glass transition temperature, T-g similar to 65 degrees C, and its hydrophobic character. The rate of film formation (at 70 degrees C) was found to be approximately 10-times faster under "wet" conditions than when "dry". Separate experiments showed that T-g of PiBMA was unaffected by water, and hence plasticization was not a factor in the enhanced rate. These results clearly show in this system that the dominant factor in promoting film formation was the water surface tension and resulting negative capillary pressure. Furthermore, it is shown that the capillary pressure in wet systems can be of sufficient magnitude to explain the observed deformation of the latex particles at 50 degrees C, i.e., 15 degrees C below T-g. Capillary pressures and forces increase with decreasing amounts of water in the interstitial regions of spherical particles, and capillary pressures can reach very high values with seemingly insignificant amounts of water. The equilibrium between the amount of interstitial water and the relative humidity of the atmospheric water is shown, and it indicates that even with low relative humidities the capillary pressures can still be quite large. We maintain that capillary pressure typically is the dominant driving "force" for film formation. These results are in contrast to the conclusions of others.