This book is the result of a meeting held in August, 1986 in Irsee, West Germany. As the title suggests, the aim of the meeting was to discuss physical processes in interstellar clouds, determine the current status, aims and future direction of the research in this area. Interstellar clouds contain nearly all the mass of diffuse gas in our galaxy, some 10% of the total galactic mass. They represent the birth site for stars and the final "dumping ground"...