From extensive radiative transfer calculations we find that clumpy torus models with No about 5--15 dusty clouds along radial equatorial rays successfully explain AGN infrared observations. The dust has standard Galactic composition, with individual cloud optical depth tV about 30--100 at visual. The models naturally explain the observed behavior of the 10mic silicate feature, in particular the lack of deep absorption features in AGN of any type. The weak 10mic emission feature tentatively detected in type 2 QSO can be reproduced if in these sources No drops to about 2 or tV exceeds about 100. The clouds angular distribution must have a soft-edge, e.g., Gaussian profile, the radial distribution should decrease as $1/r$ or $1/r^2$. Compact tori can explain all observations, in agreement with the recent interferometric evidence that the ratio of the torus outer to inner radius is perhaps as small as about 5--10. Clumpy torus models can produce nearly isotropic IR emission together with highly anisotropic obscuration, as required by observations. In contrast with strict variants of unification schemes where the viewing-angle uniquely determines the classification of an AGN into type 1 or 2, clumpiness implies that it is only a probabilistic effect; a source can display type 1 properties even from directions close to the equatorial plane. The fraction of obscured sources depends not only on the torus angular thickness but also on the cloud number No. The observed decrease of this fraction at increasing luminosity can be explained with a decrease of either torus angular thickness or cloud number, but only the latter option explains also the possible emergence of a 10mic emission feature in QSO2.