The Lubavitcher Rebbe wrote a letter once to someone about the soul and I think it is fascinating to include here:
"Referring to your questions regarding several points in Chassidus:
Regarding the five "faculties" of the Soul - Nefesh, Ruach, Neshama, Chaya, Yechida
which you find difficult to grasp, I will endeavor to throw some light on the subject with the aid of analogy, but such explanation must, of necessity, be somewhat sketchy in the course of a letter. Nevertheless, I hope it may be helpful to you.
The Jewish soul, as a "part" of G-d above, is essentially "unknowable;" we do not know what it is, but it manifests itself in various ways, and it is in the revealed area of the soul that we distinguish five "faculties."
Nefesh is that faculty of the soul which manifests itself in natural life, similar to the life spirit manifested in every living thing.
Reason or emotion does not enter here, except in a rudimentary way, and not only higher emotions born of the intellect, but even the lower emotions born of the "heart," play no part.
Ruach corresponds to the manifestation of life where in addition to the above the emotional aspects of the soul are manifested.
Neshama (in a particular sense, as different from the meaning of "soul" in general), is still a higher faculty of the soul, where the influence of the intellect is in evidence.
These three aspects of the soul are clearly reflected in the early life of a human being as successive stages: In the first few years after birth the nefesh ("sensitive," i.e. of the senses, aspect of the soul) predominates. From the age of two or three, the emotional faculties begin to develop manifestly, and in due course the intellect begins to play an ever-growing part in human life. As the child grows and matures, so does the intellect and emotions follow because emotions are born from intellect.
The other two aspects of the soul are termed makifin ("transcendental") and are seldom revealed. They remain above in the heavenly realm . However, at times a person may suddenly feel an awakening from Above, a desire to return to G-d or to Judaism or a desire to do teshuvah. This sudden feeling comes from those levels of the soul above that influence the parts of the soul within the body.
The level of chaya is associated with ecstasy, after one has utilized all three aspects (nefesh, ruach, neshama) of the soul to Divine worship. It was much in evidence with our prophets of old, and in the sacred part of life.
Yechida is even more rarely found in evidence, when the very core of the soul, the Divine "spark," comes out into the open, diffusing throughout one's being and permeating every fiber of the soul, to the exclusion of all else. It finds expression in mesiras nefesh [self-sacrifice]in actuality, in sacrificing one's life for kiddush Hashem [sactification of G-d's name]. This level of yechida is also manifest on Yom Kippur at neilah service, and at certain other times.
(it is interesting to note: When entering into a yechidus (private meeting) with a Rebbe, the soul level of yechida of the person connects with the yechida of the Rebbe. Hence the name "yechidus").
The above is a very brief explanation, and as you learn more Chassidus i you will be able to grasp it more fully."
(end of the Rebbe's letter...)
All of this refers to the G-dly soul. The G-dly soul, nefesh Elokis, is connected with the yetzer tov, the good inclination which inspires a person to do mitzvot, to do good deeds and to serve Hashem. It is oriented to spiritual matters only.
Chassidus teaches (through Tanya written by the Alter Rebbe, the first chabad Rebbe) that every Jew possess two souls: the G-dly soul and the animal soul (meaning the soul that is clothed in the blood). The animal soul is not inherently evil but the evil inclination works through the animal soul to cause a person to do averas. The animal soul is mostly emotive rather than intellectual, but it is emotive on an animal level, instinctive level, not a holy level. Therefore its emotions are not refined. it is self oriented and materially oriented
The entire purpose of the descent of the G-dly soul into the world is to refine and elevate the animal soul and body so that they too become holy and serve G-d properly. At present the body receives its life force from the soul. But in the times of Moshiach, the body will become so refined that it actually will be revealed how its source is higher than the G-dly soul and in fact in the times of Moshiach the G-dly soul will derive its life force from the body, rather than the body deriving its life force from the soul (as we have it now in the times of galus). So it will be a very elevated level in the future era.