The relativistic theory of unconstrained p-dimensional membranes (p-br
anes) is further developed and then applied to the embedding model of
induced gravity. Space-time is considered as a 4-dimensional unconstra
ined membrane evolving in an N-dimensional embedding space. The parame
ter of evolution or the evolution time tau is a distinct concept from
the coordinate time t = x(0), Quantization of the theory is also discu
ssed. A covariant functional Schrodinger equation has a solution for t
he wave functional such that it is sharply localized in a certain subs
pace P of space-time, and much less sharply localized (though still lo
calized) outside P. With the passage of evolution the region P moves f
orward in space-time. Such a solution we interpret as incorporating tw
o seemingly contradictory observations: (i) experiments clearly indica
te that space-time is a continuum in which events are existing; (ii) n
ot the whole 4-dimensional space-time, but only a 3-dimensional sectio
n which moves forward in time, is accessible to our immediate experien
ce. The notorious problem of time is thus resolved in our approach to
quantum gravity. Finally we include sources into our unconstrained emb
edding model.