We introduce a new integrable hierarchy of nonlinear differential-difference equations which we call constrained Toda hierarchy (C-Toda). It can be regarded as a certain subhierarchy of the 2D Toda lattice obtained by imposing the constraint $bar {ca
l L}={cal L}^{dag}$ on the two Lax operators (in the symmetric gauge). We prove the existence of the tau-function of the C-Toda hierarchy and show that it is the square root of the 2D Toda lattice tau-function. In this and some other respects the C-Toda is a Toda analogue of the CKP hierarchy. It is also shown that zeros of the tau-function of elliptic solutions satisfy the dynamical equations of the Ruijsenaars-Schneider model restricted to turning points in the phase space. The spectral curve has holomorphic involution which interchange the marked points in which the Baker-Akhiezer function has essential singularities.
A characterization of the Kadomtsev-Petviashvili hierarchy of type C (CKP) in terms of the KP tau-function is given. Namely, we prove that the CKP hierarchy can be identified with the restriction of odd times flows of the KP hierarchy on the locus of
turning points of the second flow. The notion of CKP tau-function is clarified and connected with the KP tau function. Algebraic-geometrical solutions and in particular elliptic solutions are discussed in detail. The new identity for theta-functions of curves with holomorphic involution having fixed points is obtained.
The Laplacian growth (the Hele-Shaw problem) of multi-connected domains in the case of zero surface tension is proven to be equivalent to an integrable systems of Whitham equations known in soliton theory. The Whitham equations describe slowly modula
ted periodic solutions of integrable hierarchies of nonlinear differential equations. Through this connection the Laplacian growth is understood as a flow in the moduli space of Riemann surfaces.
