In any actual forecast, the future evolution of the system is uncertain and the forecasting model is mathematically imperfect. Both, ontic uncertainties in the future (due to true stochasticity) and epistemic uncertainty of the model (reflecting structural imperfections) complicate the construction and evaluation of probabilistic forecast. In almost all nonlinear forecast models, the evolution of uncertainty in time is not tractable analytically and Monte Carlo approaches (”ensemble forecasting”) are widely used. This thesis advances our understanding of the construction of forecast densities from ensembles, the evolution of the resulting probability forecasts and methods of establishing skill (benchmarks). A novel method of partially correcting the model error is introduced and shown to outperform a competitive approach. The properties of Kernel dressing, a method of transforming ensembles into probability density functions, are investigated and the convergence of the approach is illustrated. A connection between forecasting and Information theory is examined by demonstrating that Kernel dressing via minimization of Ignorance implicitly leads to minimization of Kulback-Leibler divergence. The Ignorance score is critically examined in the context of other Information theory measures. The method of Dynamic Climatology is introduced as a new approach to establishing skill (benchmarking). Dynamic Climatology is a new, relatively simple, nearest neighbor based model shown to be of value in benchmarking of global circulation models of the ENSEMBLES project. ENSEMBLES is a project funded by the European Union bringing together all major European weather forecasting institutions in order to develop and test state-of-the-art seasonal weather forecasting models. Via benchmarking the seasonal forecasts of the ENSEMBLES models we demonstrate that Dynamic Climatology can help us better understand the value and forecasting performance of large scale circulation models. Lastly, a new approach to correcting (improving) imperfect model is presented, an idea inspired by [63]. The main idea is based on a two-stage procedure where a second stage ‘corrective’ model iteratively corrects systematic parts of forecasting errors produced by a first stage ‘core’ model. The corrector is of an iterative nature so that at a given time t the core model forecast is corrected and then used as an input into the next iteration of the core model to generate a time t + 1 forecast. Using two nonlinear systems we demonstrate that the iterative corrector is superior to alternative approaches based on direct (non-iterative) forecasts. While the choice of the corrector model class is flexible, we use radial basis functions. Radial basis functions are frequently used in statistical learning and/or surface approximations and involve a number of computational aspects which we discuss in some detail.