Answer to Question 1
The reticular formation (RF) consists of a bundle of approximately 90 separate nuclei that run like a cord through the middle of the brain stem upwards into the diencephalon. This network of neurons forms both ascending and descending pathways relaying important sensory and motor information between the brain and body. Sensory information from the periphery is relayed in the brain's ascending pathway through the RF into the thalamus where it is gated to determine if it will be passed on to the neocortex as part of the sensory projection system. It is through the RF that the hypothalamus sends descending signals to the brain stem and the viscera to activate the autonomically mediated fight-or-flight response. The RF was also involved in rousing you from your slumber when you heard the loud noise at your window.
Answer to Question 2
Each sensory system has a specific end point in the neocortex. The circuit from a sense organ moving through the thalamus to its specific region of the neocortex is called the sensory projection system for that sense. For example, from the ears through the auditory nucleus of the thalamus to the auditory projection area of the neocortex is the tract of the sensory projection system for hearing. The thalamus has a distinct nucleus for hearing, for vision, for taste, the muscle senses, and for the skin senses that each relay its respective sensory information to its sensory projection target in the neocortex. Also, it is through the thalamus and its pain projection system to the neocortex that we experience the sensation of pain.
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