Together with the companion volume by the same author, Operators, Functions, and Systems: An Easy Reading. Volume 1: Hardy, Hankel, and Toeplitz, Mathematical Surveys and Monographs, Vol. 92, AMS, 2002, this unique work combines four major topics of modern analysis and its applications: A. Hardy classes of holomorphic functions, B. Spectral theory of Hankel and Toeplitz operators, C. Function models for linear operators and free interpolations, and D. Infinite-dimensional system theory and signal processing. This volume contains Parts C and D. Function models for linear operators and free interpolations: This is a universal topic and, indeed, is the most influential operator theory technique in the post-spectral-theorem era. In this book, its capacity is tested by solving generalized Carleson-type interpolation problems. Infinite-dimensional system theory and signal processing: This topic is the touchstone of the three previously developed techniques. The presence of this applied topic in a pure mathematics environment reflects important changes in the mathematical landscape of the last 20 years, in that the role of the main consumer and customer of harmonic, complex, and operator analysis has more and more passed from differential equations, scattering theory, and probability to control theory and signal processing. This and the companion volume are geared toward a wide audience of readers, from graduate students to professional mathematicians. They develop an elementary approach to the subject while retaining an expert level that can be applied in advanced analysis and selected applications.