The utilization of sensor-based diagnostics in industry has been quite negligible until the past few years. However, information from different types of sensors could be utilized more widely in condition monitoring and determination of service needs of products and production process machinery. Life Cycle Cost thinking will become a routine feature of future products, and in order to be viable a product must be designed to fit this type of business model. Consequently new technologies, such as bus solutions and micromechanical MEMS sensors, will enable a multifold increase in the number of sensors. Increasingly the same sensors will be used in both process monitoring and diagnostics, and by combining information collected from several sensors more information and more reliable information will be obtained than at present on which to base diagnostics. This publication compiles the key results of studies conducted within the SMART project Monitoring and Diagnostics. On one hand, this publication aims to introduce methods of condition monitoring and diagnostics, which will become more common in the future. On the other hand, it is designed to outline the general view of the planning requirements for diagnostics of future products by using research results from case studies. Different types of advanced solutions can be used to further develop systems operations, from monitoring and diagnostics of single components to more extensive monitoring and diagnostics covering the whole system.