Close two- and three-body interactions of stars with a massive black hole lead to a wide variety of physical phenomena with observable consequences both in our Galactic center and on cosmic scales. I will discuss the dynamics of relaxation and dissipation that determine the rates and characteristics of these interactions and present recent results on relaxation mechanisms beyond minimal stellar 2-body relaxation. I will focus on the implications for gravitational waves from extreme mass ratio inspiral events and for the dynamic structures observed near the Galactic black hole.