The interstellar medium is the engine room for galactic evolution. While much is known about the conditions within the ISM, many important areas regarding the formation and evolution of the various phases of the ISM leading to star formation, and its role in important astrophysical processes, remain to be explained. This paper discusses several of the fundamental science problems, placing them in context with current activities and capabilities, as well as the future capabilities that are needed to progress them in the decade ahead. Australia has a vibrant research community working on the interstellar medium. This discussion gives particular emphasis to Australian involvement in furthering their work, as part of the wider international endeavour. The particular science programs that are outlined in this White Paper include the formation of molecular clouds, the ISM of the Galactic nucleus, the origin of gamma-rays and cosmic rays, high mass star and cluster formation, the dense molecular medium, galaxy evolution and the diffuse atomic medium, supernova remnants, the role of magnetism and turbulence in the Galactic ecology and complex organic molecules in space.
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