The S is short for synthesis, which means that DNA is being replicated. This is one of the stages of interphase, when the cell is growing and getting ready to divide. Well, this is the getting ready to divide part of interphase; the cell needs to duplicate its DNA so it has enough to divide out to daughter cells.
The water and polar residues cannot bind to the hydrophobic ones, so in the lowest energy state the hydrophobic residues are pushed together in the middle.
