The broad-line region (BLR) in Seyfert galaxy nuclei exhibits correlat
ed variations in continuum and emission-line luminosity that are quali
tatively consistent with photoionization of ionization-bounded (optica
lly thick) clouds. However, evidence is growing that a nonnegligible f
raction of the BLR cloud population is optically thin to the Lyman con
tinuum and fully ionized in hydrogen. We consider the implications of
this nebular component for observed line emission and find that inclus
ion of thin clouds in photoionization calculations can resolve several
outstanding puzzles of Seyfert variability, notably the behavior of t
he C IV lambda 1549/Ly alpha ratio as a function of continuum luminosi
ty. A similar population of thin clouds located along our line of sigh
t can account for observed ultraviolet absorption features and ''warm
absorber'' behavior at X-ray energies. The Baldwin effect for active g
alaxies, a negative correlation between ultraviolet emission-line equi
valent width and continuum luminosity, can also be explained in detail
by a decrease in the covering factor of an optically thin component w
ith increasing source luminosity. The luminosity dependence of coverin
g factor may result from outflows of thin clouds that proceed more eff
iciently in intrinsically brighter sources. The presence of absorption
features in AGNs that are blueshifted and attain the highest velociti
es in broad absorption line features associated with luminous QSOs wou
ld be consistent with this interpretation.