Recent advances in model catalysis and in spectroscopic methods that can operate at ambient pressure now enable us to investigate a catalyst in its active state, i.e. while it is functioning. Laser spectroscopy, polarization-modulated infrared (IR) spectroscopy, and high pressure photoelectron spectroscopy allow monitoring of the transformation of catalysts from the 'as-prepared' to the 'active-state', which may involve pronounced changes in catalyst structure and composition. The ultimate goal is the characterization and control of the active sites. A number of case studies are presented for Pd-based catalysts, including both single crystal and nanoparticle model catalysts, which illustrate the complex and dynamic behavior of catalytically active surfaces, with emphasis on Pd hydrides, Pd-C phases, Pd surface oxides, and bimetallic surfaces. There is clearly a need to 'mind the gap' between investigations under ultrahigh vacuum (UHV) and those at ambient pressure, as well as to account for the inherent differences between supported nanoparticles and extended single crystal surfaces.