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The data transmission rate, range, and reliability of free-space optical communication (FSO) systems are affected by a number of atmospheric phenomena, such as rain, haze, fog, snow, and scintillation. Thick fog with over 300 dB/km of attenuation limits the link length to around 100 m. Even under clear air conditions with no atmospheric scattering, the FSO communication link still suffers from fading due to scintillation. Scintillation fade margins are 2 to 5 dB for FSO links of 500 metres or less, which is well below margins for the atmospheric attenuation. For the link range beyond 1 km, scintillation may severely impact the performance of FSO links, thus resulting in the link deterioration, i.e., higher outage probability and ultimately complete link failure. In this thesis the performance of terrestrial FSO system based on the polarization shift keying modulation (POLSK) scheme under a turbulence channel is being investigated and analysed. The results are theoretically compared with on-off keying (OOK) and phase shift keying (PSK) modulated FSO systems in an atmospheric turbulence channel based on the bit error rate (BER) and the outage probability metrics. Results presented show that the binary POLSK (BPOLSK) offers the highest immunity to the phase noise in the atmospheric turbulence against OOK (with fixed and adaptive threshold levels) modulated FSO systems, primarily because it does not exhibit a BER floor. For BPOLSK under a moderate turbulence regime and for a BER of 10-9 the signal to noise ratio (SNR) requirement is ~ 39.5 dB. For the moderate turbulence regime OOK suffers from higher BER floor level. Heterodyne BPSK-FSO systems using an electrical phase locked loop (PLL) suffer from the PLL induced phase noise penalty. The power penalties due to the atmospheric turbulence must be compensated for to guarantee a reliable communication link. To mitigate the energy loss due to the atmospheric attenuation, the transmitted optical power could be increased sufficiently but it must meet eye safety requirements. Simply increasing the transmission power cannot improve the link performance limited by the atmospheric turbulence induced fading. Convolutional coding and the spatial diversity scheme have been applied in POLSKFSO systems to circumvent scintillation, which is assumed to obey the gamma-gamma distribution. A relatively simple equal gain combining (EGC) and the optimal but complex maximum ration combining (MRC) techniques are considered. The system performance and the error probabilities based on the convolutional coding together with EGC and MRC techniques are investigated and compared under different atmospheric turbulence regimes. For example, to achieve a symbol error probability (SEP) of 10-9 in a weak turbulence regime, the SNR requirements are ~ 28.5 dB and ~ 13 dB for uncoded and coded coherent heterodyne 8-POLSK schemesǡ respectively. With four detectors and using the MRC technique, the achievable power gains are ~6 dB, ~17.5 dB and ~15.5 dB in weak, moderate and strong turbulence regimes, respectively. Increasing the number of detectors to ten, results in ~24 dB of power gain a strong turbulence regime. Results presented also show that the spatial diversity offers an increased link margin as the scintillation level rises. The performance of a linear BPOLSK scheme using the direct detection has also been experimentally investigated. The obtained results are compared with OOK under the same operating conditions at the same data rate. Two transmission links of 6 m and 27 m are considered. An external interferometer is replaced by two intensity modulated laser sources with orthogonal states of polarisation (SOPs). This new scheme is less complex compared to the existing techniques. As a result of the underlying assumptions in the derivation, there is a close match between the experimental and predicted Q-factors for the weak turbulence regimes for BPOLSK-FSO system.