About the Soul

The Lubavitcher Rebbe wrote a letter once to someone about the soul and I think it is fascinating to include here:

"Referring to your questions regarding several points in Chassidus:
Regarding the five "faculties" of the  Soul -    Nefesh, Ruach, Neshama, Chaya,  Yechida      
which you find difficult to grasp, I will endeavor to throw some light on  the subject with the aid of analogy, but such explanation must, of necessity, be  somewhat sketchy in the course of a letter. Nevertheless, I hope it may be  helpful to you.

The Jewish soul, as a "part" of G-d above, is essentially  "unknowable;" we do not know what it is, but it manifests itself in various  ways, and it is in the revealed area of the soul that we distinguish five  "faculties."

Nefesh is that faculty of the soul which manifests itself in  natural life, similar to the life spirit manifested in every living thing.
Reason or emotion does not enter here, except in a rudimentary way, and not  only higher emotions born of the intellect, but even the lower emotions born of  the "heart," play no part.

Ruach corresponds to the manifestation of life where in addition  to the above the emotional aspects of the soul are

Neshama (in a particular sense, as different from the meaning of  "soul" in general), is still a higher faculty of the soul, where the influence  of the intellect is in evidence.

These three aspects of the soul are clearly reflected in the early life of a human being as successive stages: In the first few years after  birth the nefesh ("sensitive," i.e. of the senses, aspect of the soul)  predominates. From the age of two or three, the emotional faculties begin to  develop manifestly, and in due course the intellect begins to play an  ever-growing part in human life.

The other two aspects of the soul are termed makifin  ("transcendental") and are more seldom  revealed.

Chaya is associated with ecstasy, after one has bent all three  aspects (nefesh, ruach, neshama) of the soul to Divine worship. It was much in  evidence with our prophets of old, and in the sacred part of life it is the area  of chaya which expresses itself in Divine  service.

Yechida is even more rarely found in evidence, when the very core  of the soul, the Divine "spark," comes out into the open, diffusing throughout  one's being and permeating every fiber of the soul, to the exclusion of all  else. It finds expression in mesiras nefesh [self-sacrifice]in actuality, in  sacrificing one's life for kiddush Hashem [sactification of G-d's  name].

 The above is a very brief explanation, and as you learn more  Chassidus in the kuntresim [collected works] and ma'amorim [discourses], you  will be able to grasp it more fully."
 (end of the Rebbe's letter...)

 All of this refers to the G-dly soul.   Chassidus teaches (through Tanya written by the Alter Rebbe, the first
chabad Rebbe) that every Jew possess two souls: the G-dly soul and the animal  soul (meaning the soul that is clothed in the blood). The animal soul is not  inherently evil but the evil inclination works through the animal soul to cause
a person to do averas. The animal soul is mostly emotive rather than  intellectual, but it is emotive on an animal level, instinctive level, not a  holy level. Therefore its emotions are not refined. 
The entire purpose of the descent of the G-dly soul into the  world is to refine and elevate the animal soul and body so that they too become  holy and serve G-d properly. And in the times of Moshiach, the body will become  so refined that it actually will be revealed how its source is higher than the  G-dly soul and in fact in the times of Moshiach the G-dly soul will derive its   life force from the body, rather than the body deriving its life force from the  soul (as we have it now in the times of galus). So it will be a very elevated  level in the future era.