Clouds are arguably one of the most important factors modulating the earth’s climate. Yet, our understanding of cloud physical processes, climate forcings, and potential feedbacks is still poor.  In this presentation the role of observations and models in advancing our understanding of clouds in the climate system will be critically addressed. It will be shown that important insights can be gained by studying limited-complexity conceptual models of clouds as well as their microphysical and radiative characteristics. Examples both at a process level as well as the climate system level will be given based on research performed in my group over the last several years. It is argued that a combination of observations, conceptual models, and elaborate cloud microphysical and climate models is essential to further unravel the role of clouds in the climate system.