We present high-resolution soft-X-ray spectra of the prototypical Seyfert 2 galaxy , \object NGC 1068 , taken with the XMM-Newton Reflection Grating Spectrometer ( RGS ) and the Chandra Low Energy Transmission Grating Spectrometer ( 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 also provides an important contribution . A self-consistent model of a photoionized and photoexcited cone of gas is capable of reproducing the hydrogenic/heliumlike ionic line series in detail . The ratio of photoexcitation to photoionization in the cone provides important geometric information such as the radial ionic column densities , which are consistent with absorption measurements ( the warm absorber ) in Seyfert 1 galaxies . This strongly suggests that the emission spectrum we observe from \object NGC 1068 emanates from its warm absorber . The observed extent of the ionization-cone/warm-absorber in \object 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 \xi = L _ { X } / n _ { \mathrm { e } } r ^ { 2 } ( over at least \log { \xi } \sim 0 –3 ) is necessary to explain the inferred radial ionic column densities of all spectra . We show that this must primarily be due to a broad density distribution f ( n _ { \mathrm { e } } ) \propto n _ { \mathrm { e } } ^ { -1 } at each radius , spanning roughly n _ { \mathrm { e } } \sim 0.1 – 100 cm ^ { -3 } . Additional contributions to the soft-X-ray emission from hot , collisionally-ionized gas , if present , make a negligible contribution to the spectrum .