Diffuse gas in the Galaxy is observed to exist as cold (T ~ 100 K) neutral atomic gas (CNM) and warm neutral atomic (T ~ 8000 K) gas (WNM). In addition to these “thermal” phases, gas can also exist as warm (T ~ 8000 K) ionized gas, cold (T ~ 10 K) molecular gas and in warm (T ~ 100 - 500 K) interface regions or Photodissociation Regions (PDRs) on the surfaces of molecular clouds. The same chemical and thermal processes that dominate in the PDRs associated with molecular clouds are also at work in the diffuse neutral gas. Two additional “phases” are gas associated with GMCs that has H2 but no or little CO, and short lived or transient phases such as shocks, shears, and turbulence. I will first review the different gas phases in the Galaxy, their physical conditions and their dominant cooling lines. I will also discuss the observations and theoretical modeling in support of turbulence versus thermal instability as the driving force in producing the “thermal” gas phase distributions. Rough estimates for the distribution of phases in the Galaxy and the origin of the dominant emission lines has been conducted by previous telescopes (e.g., COBE, BICE) but with low velocity and low spectral resolution. The distribution and mass of the various gas phases is important for sorting out the role of SN in setting ISM pressures and in driving ISM turbulence. In addition, understanding the Galactic phase distribution is important in interpreting observations of extragalactic systems in which beams encompass several emission components. I will review the potential for future observations by e.g., STO, SOFIA, and Herschel to detect and separate phases in Galactic and extragalactic systems.