The instability of cholesterol clusters and the Umbrella effect of cholesterol in dipalmitoylphosphatidylcholine (DPPC) and dioleoylphosphatidylcholine (DOPC) lipid bilayers were investigated via atomistic molecular dynamics (MD) simulation. Cholesterol clusters in phosphatidylcholine (PC) bilayers are found to be very unstable and to readily disperse into cholesterol monomers. This instability results from the difficulty of the bilayer system in preventing water exposure to cholesterol's bulky hydrophobic bodies in a cluster. The system responds to artificially arranged cholesterol clusters in several interesting manners: (i) cholesterol clusters quickly form a "frustum" shape to reduce water penetration between cholesterol headgroups; (ii) many clusters bury themselves deeper into the bilayer interior, causing bilayer deformation; and (iii) cholesterol fluctuates rapidly, both laterally and vertically, to escape clusters. These fluctuations result in the disintegration of clusters and, in one incidence, a highly unusual flip-flop event of cholesterol across the DOPC bilayer. Our results show that cholesterols have a strong tendency to avoid forming clusters in lipid bilayers and that the fundamental cholesterol-cholesterol interaction is unfavorable. Furthermore, the radial distribution functions of cholesterol hydroxyl oxygen to various headgroup atoms of PC reveal that the PC headgroups surrounding cholesterol have a clear tendency to reorient and to extend toward cholesterol. This reorientation has a layered structure that extends 2-3 nm from the cholesterol molecule. This study demonstrates that the Umbrella hypothesis is valid in both saturated and unsaturated lipid bilayers.