All unitary Rational Conformal Field Theories (RCFT) are conjectured to be related to unitary coset Conformal Field Theories, i.e., gauged Wess-Zumino-Witten (WZW) models with compact gauge groups. In this paper we use subfactor theory and ideas of algebraic quantum field theory to approach coset Conformal Field Theories. Two conjectures are formulated and their consequences are discussed. Some results are presented which prove the conjectures in special cases. In particular, one of the results states that a class of representations of coset $W_N$ ($N\geq 3$) algebras with critical parameters are irreducible, and under the natural compositions (Connes' fusion), they generate a finite dimensional fusion ring whose structure constants are completely determined, thus proving a long-standing conjecture about the representations of these algebras.

49 pages, Improved presentations and added details, to appear in Comm.Math.Phys