  We present high-resolution soft-X-ray spectra of the prototypical Seyfert 2
galaxy, NGC 1068, taken with XMM-Newton RGS and Chandra LETGS. Its rich
emission-line spectrum is dominated by recombination in a warm plasma (bright,
narrow radiative recombination continua provide the ``smoking gun''), which is
photoionized by the inferred nuclear power-law continuum. Radiative decay
following photoexcitation of resonant transitions is also significant. A
self-consistent model of an irradiated cone of gas is capable of reproducing
the hydrogenic/heliumlike ionic line series in detail. The radial ionic column
densities we infer are consistent with absorption measurements (the warm
absorber) in Seyfert 1 galaxies. This strongly suggests that the emission
spectrum we observe from NGC 1068 emanates from its warm absorber. The observed
extent of the ionization-cone/warm absorber in NGC 1068 of about 300 pc implies
that a large fraction of the gas associated with generic warm absorbers may
typically exist on the hundreds-of-parsec scale rather than much closer to the
nucleus (e.g., less than a parsec). Spatially-resolved spectroscopy using the
LETGS of two distinct emission regions yields two noticeably different spectra.
We show that these differences are solely due to differing radial column
densities. A fairly flat distribution in ionization parameter is necessary to
explain the inferred radial ionic column densities of all spectra. This must
primarily be due to a broad density distribution at each radius, spanning
roughly 0.1-100 cm$^{-3}$. (Abridged)
