We have investigated the fragmentation of gallstones using the pulsed Ho:YAG laser, comparing it to lithotripsy using the visible pulsed-dye laser. We find that the physical mechanisms of stone fragmentation appear to be quite different in the two cases. Using high-speed photography, measurement of acoustic transients, time-resolved optical emission spectroscopy, and direct microscopic observation, we have analyzed the interaction of the Ho:YAG laser with both water and gallstones. We propose a new model in which fragmentation begins with absorption of the laser light by the stone surface. This is followed by melting and ejection of stone material, which is then swept away by the vapor bubble formed by the absorption of the Ho:YAG laser light by water. This model is in excellent agreement with our experimental observations, and differs substantially from the model developed by Teng et al. for laser lithotripsy using the visible pulsed-dye laser.