It has been over 70 years since the existence of solid dust particles in interstellar space was first convincingly shown by Trumpler (1930) based on the discovery of color excesses. Interstellar dust has now become a subject of extensive study and one of the subjects in the forefront of astrophysics.
"The role of dust is that of observer and of catalyst."
-- J. Mayo Greenberg 
Historically, interstellar dust was regarded by astronomers as an annoying interstellar "fog" which prevented an accurate measurement of distances to stars. About 40 years ago, one of us (J.M.G.) wrote in the first volume of Annual Review of Astronomy and Astrophysics (Greenberg 1963): (1) "... Among the various performers of our Galaxy - the stars, the gas clouds, the cosmic rays - the grains seem to be the least dramatic. Their role is generally that of observer and of catalyst of events rather than prime mover. Why then are we so interested in these small particles whose total mass, by the most generous estimate, is only of the order of 1 per cent of that of the gas clouds? ... [It is because of] the three important activities of the grains: (a) the negative one of extinction [blocking the light from distant stars]; (b) the positive one of tracer of physical conditions [e.g. the Galactic magnetic fields and the gas temperature]; and (c) physical interactions with other components of the interstellar medium [e.g. the formation of molecules and stars]."
"We now recognize, dust plays a role not only
as a tracer
of what goes on in space, a corrector for making different
modifications in our idea of the morphology of galaxies,
but also actively contributing to the chemical evolution
of molecular clouds."
-- J. Mayo Greenberg 
It is seen now that the role of interstellar dust was significantly underestimated 40 years ago. The advances of infrared (IR) astronomy, ultraviolet (UV) astronomy, laboratory astrophysics, and theoretical modelling over the past 40 years have had a tremendous impact on our understanding of the physical and chemical nature, origin and evolution of interstellar grains and their significance in the evolution of galaxies, the formation of stars and stellar systems (planets, asteroids, and comets), and the synthesis of complex organic molecules which possibly leads to the origins of life.
"Dust is both a subject and an agent of the Galactic evolution."
-- J. Dorschner & Th. Henning 
Instead of being a passive "observer", interstellar dust plays a vital role in the evolution of galaxies. Besides providing ~ 30% of the total Galactic luminosity via their IR emission, dust grains actively participate in the cycle of matter (gas and dust) from the interstellar medium (ISM) to stars and back from stars to the ISM: (1) solid grains condense in the cool atmospheres of evolved stars, Wolf-Rayet stars, planetary nebulae, and novae and supernovae ejecta, and are then ejected into the diffuse ISM; (2) in the diffuse ISM, interacting with hot (shocked) gas, stellar UV radiation, and cosmic rays, grains undergo destruction (sputtering by impacting gas atoms, vaporization and shattering by grain-grain collisions; see Tielens 1999 for a review); (3) in molecular clouds (formed through shock compression of diffuse gas, agglomeration of small clouds and condensation instabilities), grains are subject to growth through accretion of an ice mantle and coagulation; (4) cycling between the diffuse and molecular clouds, dust grains either form a carbonaceous organic refractory mantle as a result of UV processing of the ice mantle accreted on the silicate core in molecular clouds (Greenberg et al. 1972; Greenberg & Li 1999a), or perhaps grains re-condense in dense regions followed by rapid exchange of matter between diffuse gas and dense gas (Draine 1990); (5) collapse of dense molecular clouds leads to the birth of new stars. At the late stages of stellar evolution, gas and newly formed dust will eventually return to the ISM either through stellar winds or supernova explosions. It is clear that the life cycle of dust is associated with that of stars; stars are both a sink and a major source for the Galactic dust.
In addition to the fact that stars form out of interstellar dust and gas clouds, dust plays an important role in the process of star formation in molecular clouds: (1) IR emission from dust removes the gravitational energy of collapsing clouds, allowing star formation to take place; (2) dust grains provide shielding of molecular regions from starlight and thereby reduce the ionization levels and speed up the formation of protostellar cores (Ciolek 1995); (2) (3) IR emission from dust provides an effective probe for the star-formation processes (Shu, Adams, & Lizano 1989).
"The importance of grains in various aspects of
is evident: they shield molecular regions from dissociating
interstellar radiation, catalyze formation of molecules, and
remove molecules from the gas phase."
-- E.F. van Dishoeck, G.A. Blake, B.T. Draine, & J.I. Lunine 
The interstellar chemistry problem concerns the chemical reactions between dust and atoms and molecules in space; dust plays an active role in those reactions (see van Dishoeck et al. 1993, van Dishoeck 1999 for reviews): (1) grain surfaces provide the site for the formation of molecular hydrogen (see Pirronello 2002 for a review), and probably other simple molecules through grain surface reactions and complex organic molecules through UV photoprocessing (e.g. see Greenberg et al. 2000; Allamandola 2002); (2) dust reduces the stellar UV radiation and protects molecules from photodissociation; (3) dust provides the major heating source for interstellar gas - photoelectrons ejected from grains; (4) dust grains are also involved in ion-molecule chemistry by affecting the electron/ion densities within the cloud.
Dust is one of the basic ingredients in comets. There is growing evidence from cometary observations that comets are a storage place for products of the chemical evolution which takes place in interstellar space. The complex chemistry and molecular evolution leading to what is now seen in comets may be the necessary precursor to life on the Earth and there is reason to believe from the evidence available that the oceans on the Earth were made of comets bringing interstellar ice to our young planet (Ehrenfreund & Charnley 2000).
In this review, we start in Section 2 with a historically oriented discussion of the discovery of interstellar extinction and dust, the development of early dust models as well as current modern models. Following up in Section 3 we present the present state-of-the-art understanding of interstellar dust observations and theories. In Section 4 we present a personal perspective of future dust studies.
1 The contents in the square brackets were added by A. Li, for completeness, to summarize the then understanding as discussed in Greenberg (1963). Back.
2 Molecular clouds are partially supported by magnetic fields; star formation occurs if ambipolar diffusion deprives cloud cores of magnetic support. Charged grains can couple to the magnetic field and increase the collisional drag on the neutrals, and thereby slow the rate of ambipolar diffusion within a cloud and increase the time needed to form a protostellar core (Ciolek 1995). Back.