The wind pipe branches into two smaller tubes. These tubes are called the bronchi (in plural), or bronchus (singular). Each bronchus opens into a lung. The main function of the bronchus is to conduct air into the lungs. In lungs, the bronchus divides further into several tributaries called bronchioles, just like a branch of tree divides. No gas exchange takes place in the bronchi.
At the end of the bronchioles, there are small air sacs that are called alveoli (plural), alveolus (singular). They resemble the minute bunches of grapes. In the alveoli, blood comes in direct contact with the air. A group of capillary blood vessels surround the alveoli and the interchange of gases takes place. Overall, in alveoli, oxygen passes into the bloodstream for circulation around the body and waste carbon dioxide leaves the blood to be discharged in exhaled air.