The surface and interface sensitive nonlinear optical technique of second-harmonic generation (SHG) is a very useful diagnostic in studying surface and interface properties in thin film systems and can provide relevant information during thin film processing. An important aspect when applying SHG is the interpretation of the SHG response. In order to utilize the full potential of SHG during materials processing it is necessary to have a good understanding of both the macroscopic and the microscopic origin of the SHG response, particularly in thin film or multilayer systems where the propagation of radiation is another important aspect that should be considered carefully. A brief theoretical overview on the origin of the SHG response and a description of the propagation of radiation will be given. Furthermore, several methods will be discussed that might reveal the possible macroscopic and microscopic origins of the SHG response in thin film systems. The different approaches will be illustrated by examples of real-time and spectroscopic SHG experiments with thin film systems relevant in Si etching and deposition environments, such as (1) hydrogenated amorphous Si films deposited by hot-wire chemical vapor deposition on both Si(100) and fused silica substrates, (2) amorphous Si generated by low-energy Ar+-ion bombardment of H terminated Si(100), and (3) Al2O3 films deposited by plasma-assisted atomic layer deposition on H terminated Si(100).