An internal combustion engine includes a cylinder (21), a head (58) closing one end of the cylinder (21) and a piston (24) slidably mounted in the cylinder (22) for reciprocating motion in the usual manner, wherein reciprocation is converted into rotary motion for example, by a conventional crankshaft. The top surface (32) of the piston (24), cylinder head (58) and cylinder (21) serve as walls defining a system chamber (70) with a pocket (36) formed in one of the system chamber walls for receiving fuel and serving as a combustion chamber (70) for localized combustion therein. In one disclosed embodiment, the cylinder (21) is divided into two sections (21 and 22) with thermal insulation (14, 30) serving as a heat barrier disposed between the two sections (21 and 22) and the piston (24) has a hollow interior containing one or more heat shields (41, 42) spanning the hollow interior.