This article summarizes our theoretical understanding of the basic and simplest form of protein folding, i.e., the two-state transition. It is clear now why two-state conditions resolve both the thermodynamic and kinetic problems for protein folding. Two limiting forms of cooperative folding in protein models are described; they define a physical range in which we may expect the molecular mechanism of the folding transitions of real proteins to lie. While many of the observations were made here on the basis of highly simplified protein models, the characteristics of the microcanonical entropy functions of the two types of protein models are very general, and provide two limiting references for analyzing the behavior of general protein models. The most exciting aspect of the above knowledge is that it can guide the development of good and realistic protein models that fold fast to correct native structures.