Flexible and adaptive behaviors have evolved with increasing complexity and numbers of neuromodulator systems. The neuromodulatory locus coeruleus-norepinephrine (LC-NE) system is central to regulating cognitive function in a behaviorally-relevant and arousal-dependent manner. Through its nearly ubiquitous efferent projections, the LC-NE system acts to modulate neuron function on a cell-by-cell basis and exert a spectrum of actions across different brain regions to optimize target circuit function. As LC neuron activity, NE signaling, and arousal level increases, cognitive performance improves over an inverted-U shaped curve. Additionally, LC neurons burst phasically in relation to novel or salient sensory stimuli and top-down decision- or response-related processes. Together, the variety of LC activity patterns and complex actions of the LC-NE system indicate that the LC-NE system may dynamically regulate the function of target neural circuits. The manner in which neural networks encode, represent, and perform neurocomputations continue to be revealed. This has improved our ability to understand the optimization of neural circuits by NE and generation of flexible and adaptive goal-directed behaviors. In this review, the rat vibrissa somatosensory system is explored as a model neural circuit to bridge known modulatory actions of NE and changes in cognitive function. It is argued that fluid transitions between neural computational states reflect the ability of this sensory system to shift between two principal functions: detection of novel or salient sensory information and detailed descriptions of sensory information. Such flexibility in circuit function is likely critical for producing context-appropriate sensory signal processing. Nonetheless, many challenges remain including providing a causal link between NE mediated changes in sensory neural coding and perceptual changes, as well as extending these principles to higher cognitive functions including behavioral flexibility and decision making.