I'm not clear on the exact interpretation of monster toughness.. As an example, take the Dark Young (please!). It has toughness of 5. If it takes two wounds in a combat encounter, is its toughness actually still 5 (with 2 wounds on it), or does its "toughness" technically become 3 at that point?

Ordinarily this doesn't make much difference, but in a case where an investigator is trying to use a Banishment spell, for example, (Action: Test Lore + 2. If you pass, discard 1 Monster on the nearest space containing a Gate with toughness equal to or less than your test result), obviously it makes a ton of difference.

I couldn't find this explained anywhere in the rules or reference guide. Thanks in advance!

Just incase you need an answer immediately the toughness is still 5. His hitpoints are now 3. Different things.

I'm not in a position to cite the exact rules for this at the moment though.

Fenyx is right. Toughness is defined as the maximum amount of damage a monster can take before being killed. If you check the reference guide, you'll notice that whenever a monster is damaged, the rules uses the wording "loses Health" and not "reduces its Toughness", with the final specific (Rules Ref, pag 3, under Combat Encounters)

"When a Monster has lost Health equal to or greater than its toughness, the Monster is defeated and returned to the monster cup"

it's never stated "when the toughness of the monster is reduced to zero", so that the toughness of a monster is a fixed value; what varies is the damage on the monster

That's the way I've always played it....just wanted to make sure that was correct, especially in light of the new interaction of monster toughness and advancing the Active Mystery when it's an epic monster that was introduced in the Mountains of Madness expansion. Thanks guys!!!

The "Advance the Active Mystery"-Effect does indeed make an Epic Monster (if it's part of a Mystery) lose Toughness, instead of Health. Mind, though, that you cannot just discard Epic Monsters the way you do with normal Monsters. Only effects, which make the Monster lose health, are allowed on Epic Monsters. You cannot move them by any means, either (only if it's an effect triggered by the Epic Monster itself, like Children of Yig).