I describe an approach to the problem of forming hypotheses about hidden mechanisms within devices - the "black box" problem for physical systems. The approach involves enumerating different causal structures for devices, placing an ordering on these hypothesis types, and carefully controlling the construction of hypotheses, as well as enumerating a set of physical and causal constraints to prune hypotheses. I relate in detail the performance of an implemented causal modeling system on the surprisingly puzzling pocket tire gauge. Results from several examples indicate that the ideas presented support capabilities for maintaining manageably sized hypothesis sets and for making fine distinctions among hypotheses.I also describe the use of causal models in the problem of monitoring physical systems. Specifically, I address two issues that arise in the task of detecting anomalous behavior in complex systems with numerous sensor channels: how to adjust alarm thresholds dynamically, within the changing operating context of the system, and how to use sensors selectively, so that nominal operation can be verified reliably without processing a prohibitive amount of sensor data. My approach involves simulation of a causal model of the system, which provides information on expected sensor values, and on dependencies between predicted events, that is useful in assessing the relative importance of events so that sensor resources can be allocated effectively.