We report the discovery of kilohertz fluctuations, including quasiperiodic oscillations (QPO) at {approx}330 Hz (260-407 Hz) and {approx}760 Hz (671-849 Hz) and a broadband kilohertz continuum in the power-density spectrum of the high-mass X-ray binary pulsar Centaurus X-3. These observations of Cen X-3 were carried out with the Rossi X-Ray Timing Explorer (RXTE). The fluctuation spectrum is flat from millihertz to a few hertz, then steepens to f{sup -2} behavior between a few hertz and {approx}100 Hz. Above 100 Hz, the spectrum shows the QPO features, plus a flat continuum extending to {approx}1200 Hz and then falling out to {approx}1800 Hz. These results, which required the co-adding three days of observations of Cen X-3, are at least as fast as the fastest known variations in X-ray emission from an accreting compact object (kilohertz QPO in LMXB sources) and probably faster since extension to {approx}1800 Hz is indicated by the most likely parameterization of the data. Multidimensional radiation hydrodynamics simulations of optically thick plasma flow onto the magnetic poles of an accreting neutron star show that the fluctuations at frequencies above 100 Hz are consistent with photon bubble turbulence and oscillations (PBO) previously predicted to be observable in this source. Wemore » show that previous observations of Cen X-3 constrain the models to depend on only one parameter, the size of the polar cap. For a polar cap opening angle of 0.25 radians (polar cap radius {approx}2.5 km and area {approx}20 km2, for a neutron star radius of 10 km), we show that the spectral form above 100 Hz is reproduced by the simulations, including the frequencies of the QPO and the relative power in the QPO and the kilohertz continuum. This has resulted in the first model-dependent measurement of the polar cap size of an X-ray pulsar. The simulations underpredict the overall amplitude of the observed spectrum, which we suggest is the consequence of a two-dimensional axisymmetric simulation of an intrinsically three-dimensional phenomenon. The power-density spectrum of Cen X-3 shows a dramatic decrease above {approx}1000 Hz, which suggests an optical depth {approx}30 across the accretion mound consistent with effects of radiative diffusion in the simulations. We identify this decline at high frequency as the first direct evidence of radiative diffusion near the surface of a neutron star (NS). We suggest the fluctuations observed at frequencies below 100 Hz, whose spectrum has a different form from that of the kilohertz phenomena, reflect intermittency in the mass transfer mechanism that carries plasma from the accretion disk to field aligned flow onto the neutron star's polar caps. Using simple estimates based on Rayleigh-Taylor instabilities, possibly modulated by intrinsic disk turbulence, we show that mass transfer in ''blobs'' forming through Rayleigh-Taylor disruption of the disk's inner edge can explain the large amplitude fluctuations required by the spectrum at frequencies f{approx}1 Hz, but only if magnetic pressure in the disk's innermost regions inflates the disk until its scale height is comparable to the magnetosphere's size {approx}4300 km. The observational results required the development of a procedure for the careful determination of the dead-time effects of the PCA. This procedure is described in Appendix A. As a consequence of the use of observations of Cyg X-1 for the estimation of dead-time corrections for the observations of Cen X-3, we have also demonstrated that the black hole Cyg X-1 shows clear evidence of variability up to a frequency of {approx}280 Hz. Also observations of GX 17+2 were used to validate the procedure for dead-time corrections. This analysis of GX 17+2 clearly indicates the presence of a kilohertz QPO and the absence of any significant simultaneous kilohertz continuum. (c) 2000 The American Astronomical Society.« less