When a drop impacts on a liquid surface it entraps a small amount of air under its centre as the two liquid surfaces meet. The contact occurs along a ring enclosing a thin disk of air. We use the next-generation ultra-high-speed video camera, capable of 1 million f.p.s. (Etoh et al. 2002), to study the dynamics of this air sheet as it contracts due to surface tension, to form a bubble or, more frequently, splits into two bubbles. During the contraction of the air disk an azimuthal undulation, resembling a pearl necklace, develops along its edge. The contraction speed of the sheet is accurately described by a balance between inertia and surface tension. The average initial thickness of the air sheet decreases with higher impact Reynolds numbers, becoming less than one micron. The total volume of air entrapped depends strongly on the bottom curvature of the drop at impact. A sheet of micro-bubbles is often observed along the original interface. Oguz–Prosperetti bubble rings are also observed. For low Weber numbers (We<20) a variety of other entrapment phenomena appear.