We explore further the suggestion to describe a pre- and postselected
system by a two-state, which is determined by two conditions. Starting
with a formal definition of a two-state Hilbert space and basic opera
tions, we systematically recast the basics of quantum mechanics-dynami
cs, observables, and measurement theory-in terms of two-states as the
elementary quantities. We find a simple and suggestive formulation tha
t ''unifies'' two complementary observables: probabilistic observables
and nonprobabilistic ''weak'' observables. Probabilities are relevant
for measurements in the ''strong-coupling regime.'' They are given by
the absolute square of a two-amplitude (a projection of a two-state).
Nonprobabilistic observables are observed in sufficiently weak measur
ements and are given by linear combinations of the two-amplitude. As a
subclass they include the ''weak values'' of Hermitian operators. We
show that in the intermediate regime, one may observe a mixing of prob
abilities and weak values. A consequence of the suggested formalism an
d measurement theory is that the problems of nonlocality and Lorentz n
oncovariance, of the usual prescription with a ''reduction,'' may be e
liminated. We exemplify this point for the Einstein-Podolsky-Rosen exp
eriment and for a system under successive observations.