This book aims at giving users of identification software the fundamental insight needed to carry out interactive design of models of physical objects. The book therefore starts with the fundamental conditions for setting up correct identification problems, continues by highlighting the roles of validation and falsification of models, and ends with concrete procedures for interactive design of stochastic dynamic models. The approach is new. A second novelty is that the book does not concentrate on the usual blackbox models. It em- phasizes the purpose of the design and the importance of supplementing experimental data with the partial apriori knowledge that is often available to the designer. The book also emphasizes the prospects and limitations of identification. It clarifies what can and cannot be inferred about the object under various circumstances, and, consequently, what kind of modelling errors the computer can and cannot diagnose.