This paper explores the physics of intelligence and provides an overview of what happens in the brain when a person is engaged in mental activity that we classify under thought or intelligence. It traces the formation of a concept starting with reception of visible or detectable signals from the real world by and external to the sense organs, their conversion and encoding on basic cosmic waves as brain waves, transmittal to the creative-integrative region (CIR) of the cortex, storage of sensation components in the respective sensation regions as memory and recall by and recomposition in the CIR as physical concept at its primitive nodal region. It explains formation of simple and complex concept, construction of mathematical space and physical theory and the underlying physical processes involved at every phase starting with reception of external signals by the sense organs. It also explains creation of abstract concepts, i.e., concepts not based on sensation such as mathematical concepts. These activity and capability of the CIR are "creative." All of it is accomplished through the new methodology of qualitative mathematics and modeling.