It is well accepted that catalytically active surfaces frequently adapt to the reaction environment (gas composition, temperature) and that relevant "active phases" may only be created and observed during the ongoing reaction. Clearly, this requires the application of in situ spectroscopy to monitor catalysts at work. While changes in structure and composition may already occur for monometallic single crystal surfaces, such changes are typically more severe for oxide supported nanoparticles, in particular when they are composed of two metals. The metals may form ordered intermetallic compounds (e.g. PdZn on ZnO, Pd2Ga on Ga2O3) or disordered substitutional alloys (e.g. PdCu, PtCu on hydrotalcite). We discuss the formation and stability of bimetallic nanoparticles, focusing on the effect of atomic and electronic structure on catalytic selectivity for methanol steam reforming (MSR) and hydrodechlorination of trichloroethylene. Emphasis is placed on the in situ characterization of functioning catalysts, mainly by (polarization modulated) infrared spectroscopy, ambient pressure X-ray photoelectron spectroscopy, X-ray absorption near edge structure, and X-ray diffraction. In the present contribution, we pursue a two-fold, fundamental and applied, approach investigating technologically applied catalysts as well as model catalysts, which provides comprehensive and complementary information of the relevant surface processes at the atomic or molecular level. Comparison to results of theoretical simulations yields further insight. Several key aspects were identified that control the nanoparticle functionality: (i) alloying (IMC formation) leads to site isolation of specific (e.g. Pd) atoms but also yields very specific electronic structure due to the (e.g. Zn or Ga or Cu) neighboring atoms; (i) for intermetallic PdZn, the thickness of the surface alloy, and its resulting valence band structure and corrugation, turned out to be critical for MSR selectivity; (ii) the limited stability of phases, such as Pd2Ga under MSR conditions, also limits selectivity; (iii) favorably bimetallic catalysts act bifunctional, such as activating methanol AND water or decomposing trichlorothylene AND activating hydrogen; (iv) bifunctionality is achieved either by the two metals or by one metal and the metal-oxide interface; (v) intimate contact between the two interacting sites is required (that cannot be realized by two monometallic nanoparticles being just located close by). The current studies illustrate how rather simple bimetallic nanoparticles may exhibit intriguing diversity and flexibility, exceeding by far the properties of the individual metals. It is also demonstrated how complex reactions can be elucidated with the help of in situ spectroscopy, in particular when complementary methods with varying surface sensitivity are applied.