This material is based on contributions by a number of people including Janet Aisbett, Humberto Bustince, Oscar Castillo, Jonathan M. Garibaldi, Hani Hagras, Vladik Kreinovich, Jerry M. Mendel, Frank Rhee, Terry Rickard, Woei Wan Tan and Christian Wagner including notably discussions at a Panel Session at the 2011 IEEE Symposium on Advances in Type-2 Fuzzy Logic Systems organized by Garibaldi, Hagras and Rhee. This paper focuses on the challenges of theoretical underpinning including notation, learning type-2 sets and systems and broadening the areas where type-2 system are applied. The misconceptions we discuss are around computational performance of type-2 systems and notion that type-2 systems are intended to replace type-1 fuzzy systems.