We study first- and second-order coherence of trapped dilute Bose gases usi
ng appropriate correlation functions. Special attention is given to the dis
cussion of second-order or density correlations. Except for a small region
around the surface of a Bose-Einstein condensate the correlations can be ac
curately described as those of a locally homogeneous gas with a spatially v
arying chemical potential. The degrees of first- and second-order coherence
are therefore functions of temperature, chemical potential, and position.
The second-order correlation function is governed both by the tendency of b
osonic atoms to cluster and by a strong repulsion at small distances due to
atomic interactions. In present experiments both effects are of comparable
magnitude. Below the critical temperature the range of the bosonic correla
tion is affected by the presence of collective quasiparticle excitations. T
he results of some recent experiments on second- and third-order coherence
are discussed. It is shown that the relation between the measured quantitie
s and the correlation functions is much weaker than previously assumed. [S1
050-2947(99)04405-4].