  We present XMM-Newton observations of gamma^2 Velorum (WR 11, WC8+O7.5III, P
= 78.53 d), a nearby Wolf-Ray binary system, at its X-ray high and low states.
At high state, emission from a hot collisional plasma dominates from about 1 to
8 keV. At low state, photons between 1 and 4 keV are absorbed. The hot plasma
is identified with the shock zone between the winds of the primary Wolf-Rayet
star and the secondary O giant. The absorption at low state is interpreted as
photoelectric absorption in the Wolf-Rayet wind. This absorption allows us to
measure the absorbing column density and to derive a mass loss rate 8x10^{-6}
M_sun/yr for the WC8 star. This mass loss rate, in conjunction with a previous
Wolf-Rayet wind model, provides evidence for a clumped WR wind. A clumping
factor of 16 is required. The X-ray spectra below 1 keV (12 Ang) show no
absorption and are essentially similar in both states. There is a rather clear
separation in that emission from a plasma hotter than 5 MK is heavily absorbed
in low state while the cooler plasma is not. This cool plasma must come from a
much more extended region than the hot material. The Neon abundance in the
X-ray emitting material is 2.5 times the solar value. The unexpected detection
of CV (25.3 Ang) and CVI (31.6 Ang) radiative recombination continua at both
phases indicates the presence of a cool (~40,000 K) recombination region
located far out in the binary system.

Astrophysics