Characterized by the never ending jokes about St. Peter as doorkeeper of the Pearly Gates, many people believe that when people of faith die, they, in a vague state of disembodied blessedness, will be admitted into heaven, where they will dwell for all eternity with the immortals. Unfortunately, these ideas find their origin in Greek mythology not the Bible, although we seem to have added a few details of our own, i.e. I doubt the Greeks were responsible for the oft portrayed clouds and harps.
However, there are two problems with this popular concept. The first being that "Heaven", that is the Kingdom of God preached by Jesus, will not be an ethereal place situated in the outer limits of space, but very much here on earth. [See What and Where is Heaven?] and secondly, there is something called The Intermediate State for those who are disciples of Christ. Although this phrase is not found in the Bible, it was coined to refer to the time between death and the resurrection of our physical bodies, the concept is found in the Scriptures although, like many of the subjects concerning the future, not clear cut, well defined doctrine.
While it is true that the Intermediate State is a peripheral issue, not essential to the gospel, it is entirely natural for us to be intensely interested in something which concerns every last one of us. In any case, the subject goes well beyond mere curiosity to a matter of faith and hope for the Christian.
We know two things for certain... we are all made up of body and spirit, and that when we die, be we believers or unbelievers, our spirit departs our body....
Man is Both Spirit And Body
Both the Old Testament and the New Testament clearly show that man is made up of both spirit (the soul) and body...
The burden of the word of the LORD concerning Israel. Thus declares the Lord who stretches out the heavens, lays the foundation of the earth, and forms the spirit of man within him, (Zechariah 12:1 NASB)
Do not fear those who kill the body but are unable to kill the soul; but rather fear Him who is able to destroy both soul and body in hell. (Matthew 10:28 NASB)
The Spirit Departs the Body at Death
The Genesis 35:18 account of the death of Rachel says, "her soul was departing"... which means it separated from her body.
It came about as her soul was departing (for she died), that she named him Ben-oni; but his father called him Benjamin. (Genesis 35:18 NASB)
After Jairus' daughter died, Jesus commanded her to "arise," upon which "her spirit returned, and she got up immediately". Something cannot return, unless it had previously left. In other words, the daughter's spirit had departed from her body when she died.
He, however, took her by the hand and called, saying, "Child, arise!" And her spirit returned, and she got up immediately; and He gave orders for something to be given her to eat. (Luke 8:54-55 NASB)
The Two Points of View
The difficulty being that there are two main points of view as to what happens when believers die. While there is no argument as to what happens to the body, there is a difference of opinion as to what happens to the spirit.
One school of thought holds that during this time we are unconscious, or perhaps do not even 'exist', while the second believes that our spirits continue living and are very much alive and conscious, while awaiting the return to a resurrected body and an eternity in the new earth.
However, the Seventh-day Adventists teach that the soul is unconscious until the body is resurrected, which they call "soul-sleep." The Jehovah’s Witnesses, on the other hand, believe that when someone dies (believers and non-believers alike), they cease to exist. Thus God will have to remake everyone from memory. It seems not to have occurred to them that this is not a resurrection of the body, but the creation of a clone, who will live forever in Heaven.
As previously mentioned, the state of a believer between death and resurrection has not been clearly outlined in the Bible. All we have to go on is clues provided by various verses, in both the Old Testament and the New. However, what we cannot do is cite a passage that seems to substantiate one position or the other without carefully comparing Scripture with Scripture, which is the only way to arrive at a Biblically reliable position. Sound doctrine cannot be based on isolated proof texts, but can only be developed within the framework of the total teaching of Scripture.
The idea of unconsciousness is largely based on several verses in the Old Testament, some of which are in
For there is no mention of You in death; In Sheol who will give You thanks? (Psalms 6:5 NASB)
Will You perform wonders for the dead? Will the departed spirits rise and praise You? Selah. Will Your lovingindness be declared in the grave, Your faithfulness in Abaddon? Will Your wonders be made known in the darkness? And Your righteousness in the land of forgetfulness? (Psalms 88:10-12 NASB)
The dead do not praise the Lord, Nor do any who go down into silence; (Psalms 115:17 NASB)
His spirit departs, he returns to the earth; In that very day his thoughts perish. (Psalms 146:4 NASB)
However, one has to remember that the Psalms are Hebrew poetry, and that virtually all poetry is well known for its figurative language, which often uses dramatization or hyperbole, not meant to be taken literally but is used to make a vivid and lasting impression. This makes it very unwise to build a doctrine solely on isolated verses in the Psalms. For example Psalm 88:4-5 says ...
I am reckoned among those who go down to the pit; I have become like a man without strength, Forsaken among the dead, Like the slain who lie in the grave, Whom You remember no more, and they are cut off from Your hand. (Psalms 88:4-5 NASB)
It is obviously inaccurate to say that God has forgotten the dead. Therefore, when Psalm 6:5 says that people in Sheol do not remember God, we do not need to take it any more literally than Psalm 88:5, which says that God does not remember them.
Also note that Psalm 115:17 tells us that the dead "do not praise the Lord". However, the very next verse says... "we will bless the Lord From this time forth and forever." (Vs. 18). Unless the author was anticipating never dying, both concepts are impossible.
Again, it is unlikely that Psalm 30:2-3, which says "O Lord my God, I cried to You for help, and You healed me. O Lord, You have brought up my soul from Sheol; You have kept me alive, that I would not go down to the pit" (NASB) is to be taken literally.
Also see Bible texts, including passages from Psalms 51 and 58, that are misused in the attempt to prove "Original Sin". HERE
Other verses used to support the belief that Christians are unconscious between the time they die, and the resurrection of their physical bodies, are
The dead do not praise the Lord, Nor do any who go down into silence; But as for us, For the living know they will die; but the dead do not know anything, nor have they any longer a reward, for their memory is forgotten. (Ecclesiastes 9:5 NASB)
Whatever your hand finds to do, do it with all your might; for there is no activity or planning or knowledge or wisdom in Sheol where you are going. (Ecclesiastes 9:10 NASB)
The problem is that verse 9:5 says that the dead are forgotten and will never have a reward, which we know is not factual. Moreover, the very next verse (9:6) goes on to state the dead "... will no longer have a share in all that is done under the sun", which, if literal, would effectively put paid to the idea of eternal life in God's Kingdom.
Ecclesiastes 3:19 worsens the situation, saying "... the fate of the sons of men and the fate of beasts is the same. As one dies so dies the other; indeed, they all have the same breath and there is no advantage for man over beast, for all is vanity. (NASB)
While Isaiah seems to categorically state that the dead in Sheol are mute, note that the same verse also says they cannot hope for God's faithfulness which, if taken literally, means we are all up a creek without the proverbial paddle.
For Sheol cannot thank You, Death cannot praise You; Those who go down to the pit cannot hope for Your faithfulness. (Isaiah 38:18 NASB)
Additionally, Isaiah 14:9 makes it sound like the people in Sheol can be both awakened and stirred up.
Sheol from beneath is excited over you to meet you when you come; It arouses for you the spirits of the dead, all the leaders of the earth; It raises all the kings of the nations from their thrones. (Isaiah 14:9 NASB)
All of which should make it obvious that Isaiah was speaking metaphorically, not literally.
Possibly the strongest argument in favour of unconsciousness comes from two verses in the 12th chapter of the book of Daniel.
1) The first one reads...
Many of those who sleep in the dust of the ground will awake, these to everlasting life, but the others to disgrace and everlasting contempt. (Daniel 12:2 NASB)
However, "sleep' was used as a euphemism for death in both the Old and the New Testaments. (Note that the Hebrew word used (shâkab) is often translated 'lie down')
Otherwise it will come about, as soon as my Lord the king sleeps (Heb. shâkab) with his fathers, that I and my son Solomon will be considered offenders." (1 Kings 1:21 NASB)
Then David slept (Heb. shâkab) with his fathers and was buried in the city of David. (1 Kings 2:10 NASB)
This is made particularly obvious in the account of Elisha healing the son of the woman in Shunem when, although he was dead, the boy was said to have not woken up. Note that, as verse 20 points out they already knew the boy was dead.
Then Gehazi passed on before them and laid the staff on the lad's face, but there was no sound or response. So he returned to meet him and told him, "The lad has not awakened." When Elisha came into the house, behold the lad was dead and laid on his bed. (2 Kings 4:31-32 NASB)
Similarly, in the New Testament, our Lord spoke of Lazarus as being "asleep" which initially confused even His disciples.
This He said, and after that He *said to them, "Our friend Lazarus has fallen asleep (Gk. koimao); but I go, so that I may awaken him out of sleep." The disciples then said to Him, "Lord, if he has fallen asleep, he will recover." Now Jesus had spoken of his death, but they thought that He was speaking of literal sleep. So Jesus then said to them plainly, "Lazarus is dead, (John 11:11-14 NASB)
In his first letter to the Corinthians, Paul, using the same Greek word that Jesus did, told them that many of them had died because they had celebrated the Lord's Supper in an unworthy manner.
For this reason many among you are weak and sick, and a number sleep (Gk. koimao). (1 Corinthians 11:30 NASB)
As a side note... It is particularly noteworthy that the Bible frequently speaks of spiritual enlightenment as "life" and spiritual darkness as "death." (See Eternal Life...A Result of Redemption)
2) The other verse in Daniel 12 is
But as for you, go your way to the end; then you will enter into rest and rise again for your allotted portion at the end of the age." (Daniel 12:13 NASB)
It is assumed that God was telling Daniel that he would "sleep" until the end of the age when he would be resurrected and given his just rewards. However, the only correct way to interpret the Word of God is to take other relevant verses into consideration. In this case, we need to take a passage from the first book of Thessalonians into consideration
(14) For if we believe that Jesus died and rose again, even so God will bring with Him those who have fallen asleep in Jesus. (15) For this we say to you by the word of the Lord, that we who are alive and remain until the coming of the Lord, will not precede those who have fallen asleep. (16) For the Lord Himself will descend from heaven with a shout, with the voice of the archangel and with the trumpet of God, and the dead in Christ will rise first. (17) Then we who are alive and remain will be caught up together with them in the clouds to meet the Lord in the air, and so we shall always be with the Lord. (1 Thessalonians 4:14-17 NASB)
Pay attention to verse 14 which says "God will bring with Him those who have fallen asleep in Jesus", then read verse 16, which says "the dead in Christ will rise first" (All emphasis added). Now either this is a huge contradiction since the dead cannot return with God and rise from the earth, or the verse means that the spirits which have departed the body when a person dies will return with the Lord, to be reunited with the resurrected body.
So what did it mean when the Lord told Daniel to "rest" until the end of the age? Although we cannot be dogmatic about it, it is possible, that after being given vision after vision of the future right up to the end of days, Daniel was simply being told that his work was now over, and he himself could 'rest' until it all came to pass. The fact that this verse is the very last one of the book, gives some credence to this view.
While the New Testament makes no direct and unambiguous statements regarding the state of believers after they die, there are verses in both the Gospels and Paul's writings that lean towards their spirits being with Christ while they await the resurrection of their bodies. Note however that the parable of Lazarus is not one of them. (See Difficulties with the Traditional Interpretation of The Parable of The Rich Man and Lazarus HERE)
For to me, to live is Christ and to die is gain. But if I am to live on in the flesh, this will mean fruitful labor for me; and I do not know which to choose. But I am hard-pressed from both directions, having the desire to depart and be with Christ, for that is very much better; (Philippians 1:21-23 NASB)
The most important point in the above statement, is that Paul says he desires to depart "and be with Christ", not depart and lapse into sleep, unconsciousness, or non existence.
Additionally, when he said "to live is Christ" it did not mean that he thought that life was wonderful, but as Bob Deffinbaugh says
... Paul is saying that for him to live is to live out the life of Christ: "I have been crucified with Christ, and it is no longer I who live, but Christ lives in me. So the life I now live in the body, I live because of the faithfulness of the Son of God, who loved me and gave himself for me” (Galatians 2:20). Living out the life of Christ means living out the life that Christ lived here on this earth. 
And that life was not always a pleasant one. Jesus Himself pointed out that His disciples would suffer at the hand of an unbelieving world, which would hate and persecute them just as it hated and persecuted Christ. See, for example, John 15:18-21. And this was certainly true of Paul who was jailed, mobbed, stoned etc. But, as pastor Deffinbaugh also goes on to say...
Paul knew, of course, that "to die" was better than "to live," so far as the benefits for him were concerned. But Paul was like his Lord in that he was a humble servant, who put the interests of others above his own (see Philippians 2:1-30). He sensed that, while death was better for him, if he were to live on, he would be able to continue to minister to the Philippians and others. The choice, then, came down to what was best for him, versus what was best for the Philippians. And being the servant that he was, Paul's preference was to live on, and thus to continue to serve his Lord and those he loved. 
There is no question that Paul fully realized the importance of the work he was doing... establishing strong churches shepherded by mature local leaders (Acts 14:23), that would, after he had moved on, not only be able to govern themselves, but would, in turn, spread the Gospel to others (1 Thessalonians 1:7-8). In his words....
But whatever things were gain to me, those things I have counted as loss for the sake of Christ. More than that, I count all things to be loss in view of the surpassing value of knowing Christ Jesus my Lord, for whom I have suffered the loss of all things, and count them but rubbish so that I may gain Christ, (Philippians 3:7-8 NASB)
When a person's entire life is wrapped up in living for Christ as Paul's was, it is very hard to believe that he would consider unconsciousness, however temporary, as "far better" than living, and continuing to further God's kingdom. However, seeing Christ face to face would certainly be "far better" than any other option.
2 Corinthians 5:6-8
Once again, Paul states that he would prefer to be absent from the body and to be at home with the Lord.
Therefore, being always of good courage, and knowing that while we are at home in the body we are absent from the Lord-- for we walk by faith, not by sight-- we are of good courage, I say, and prefer rather to be absent from the body and to be at home with the Lord. (2 Corinthians 5:6-8 NASB)
The statement very clearly asserts that, while we are living, we are, in some sense, absent from the Lord but, at death, we will be with Him. It decidedly refutes the concept of us being unconscious after we die, since we cannot "be with the Lord" and be insensible at the same time.
Jesus' words, "Truly I say to you, today you shall be with Me in Paradise", said to the thief on the cross, has been the subject of some controversy. The Jehovah's Witness's New World Translation punctuates His words very differently from any standard Bible that I know of.
In their version, the comma is placed after the word "today"... ("Truly I say to you today, you shall be with Me in Paradise") which gives one the impression that "today" refers to the day Jesus was speaking.
However, this statement was in response to the request made by the thief .... that Jesus remember him when He (Jesus) came into His kingdom. In this context, the only way to understand Jesus' words is that He was telling the thief that he would be with Him, in His kingdom, that very day. Considering that Jesus' body lay in the tomb for three days, the only way our Lord could make that promise was if he was referring to their spirits, which immediately departed their bodies when they died.
1 Thessalonians 4:14
The second part of I Thessalonians 4 is designed to comfort the Thessalonians who had been suffered the loss of someone. Paul attempts to console them so that they would not grieve like the rest of humanity that had no hope. He informed them that when He returned to earth, God Himself would bring with Him those who had fallen asleep in Christ ie. believers.
For if we believe that Jesus died and rose again, even so God will bring with Him those who have fallen asleep in Jesus. (1 Thessalonians 4:14 NASB)
There are those that interpret this verse to mean that God will first raise the spirits of the righteous dead, then bring them to earth where they will be reunited with their bodies. However, this theory contradicts other passages that speak of the righteous dead as being quite "alive" (See Revelation 6:9-10 next).
Although it is true that Revelation is highly symbolic and the martyred individuals spoken about in the following verse were probably not under the altar, it is apparent that they are conscious of time, remember what had happened to them on earth, are able to ask God a question, and hear His answer.
When the Lamb broke the fifth seal, I saw underneath the altar the souls of those who had been slain because of the word of God, and because of the testimony which they had maintained; and they cried out with a loud voice, saying, "How long, O Lord, holy and true, will You refrain from judging and avenging our blood on those who dwell on the earth?" And there was given to each of them a white robe; and they were told that they should rest for a little while longer, until the number of their fellow servants and their brethren who were to be killed even as they had been, would be completed also. (Revelation 6:9-11 NASB)
The arguments lean very heavily in favor of the spirits of believers departing their bodies at the point of death, and going to be with Christ where they await the resurrection. Whereas the "proof texts" that are used to substantiate the idea that, after we die, we are no longer conscious or even go out of existence, are very weak, and contradicted by other passages.
Certainly the Bible does not give us any detail regarding the Intermediate State which we will spend with Christ in the Third Heaven, or Heaven of Heavens, which is presently God's throne room. (In the Old Testament, the word "heaven" referred to either the sky, outer space, or the very dwelling place of God. Scroll about half way down THIS page for details.
The Third Heaven area is currently separated from the earth and the other two heavens (outer space and our atmosphere) by a sea of crystal. See No Longer Any Sea?
All that eventually matters is that the Intermediate State is a very temporary one. At the Seventh Trumpet, we will return with Christ, be reunited with our bodies somewhere in the earth's atmosphere. where we will be joined "in the clouds" by those believers still alive on earth whose bodies will be changed from mortal to immortal.
Then we who are alive and remain will be caught up together with them in the clouds to meet the Lord in the air, and so we shall always be with the Lord. (1 Thessalonians 4:17 NASB)
Finally, after the Seven Bowls (the culmination of God's wrath) we will descend back to earth with Christ to live for a thousand years. After which, the "sea" will be eliminated and God will come to live among His people, bringing the New Jerusalem with Him.
Note: Many people understand John's words "there is no longer any sea", in Revelation 21:1, to mean that there will no longer be any oceans in the new earth. But is this true? See No Longer Any Sea? Which is Part IV b of What And Where is “Heaven”?
The State of Unbelievers After Death
This, I am sorry to say, is a far simpler issue. As previously mentioned, the spirits of all people leave their bodies when they die. However, the spirits of those who have refused or ignored the Gospel message, which is God's offer of life eternal in His kingdom, will find themselves in Sheol (called Hades in the New Testament), where they will spend a long period of time which begins at the moment of their deaths, and extends through the millennium. It is during this time that the weeping and gnashing of teeth that Jesus spoke of will take place. See, for example, Matthew 8:12.
After the thousand year rule of Christ, they will also be resurrected... not to enter into God's kingdom, but to face the White Throne Judgment and consigned to hell, which is not a place of eternal torment as traditional Christianity has so long taught, but simply death. [See What and Where is Hell?] Revelation calls it the "second death" because that is exactly what it is. The people concerned have died once, spent a century plus in Hades, then will die again. This time for good. Unlike much of the book of Revelation, chapter 20 through (at least) 21:5 is in chronological order, indicated by the frequent use of the word "then". What follows is an outline of the events that transpire after just before and after the millennium. Note: the words "The rest of the dead did not come to life until the thousand years were completed" in verse 5 should be in parentheses and has been rendered so in at least one literal version of the Bible.
(1) Then I saw an angel coming down from heaven, holding the key of the abyss and a great chain in his hand. (2) And he laid hold of the dragon, the serpent of old, who is the devil and Satan, and bound him for a thousand years; (3) and he threw him into the abyss, and shut it and sealed it over him, so that he would not deceive the nations any longer, until the thousand years were completed; after these things he must be released for a short time.
4) Then I saw thrones, and they sat on them, and judgment was given to them. And I saw the souls of those who had been beheaded because of their testimony of Jesus and because of the word of God, and those who had not worshiped the beast or his image, and had not received the mark on their forehead and on their hand; and they came to life and reigned with Christ for a thousand years. 5) The rest of the dead did not come to life until the thousand years were completed. This is the first resurrection. (6) Blessed and holy is the one who has a part in the first resurrection; over these the second death has no power, but they will be priests of God and of Christ and will reign with Him for a thousand years. (7) When the thousand years are completed, Satan will be released from his prison, (8) and will come out to deceive the nations which are in the four corners of the earth, Gog and Magog, to gather them together for the war; the number of them is like the sand of the seashore. (9) And they came up on the broad plain of the earth and surrounded the camp of the saints and the beloved city, and fire came down from heaven and devoured them. (10) And the devil who deceived them was thrown into the lake of fire and brimstone, where the beast and the false prophet are also; and they will be tormented day and night forever and ever.
(11) Then I saw a great white throne and Him who sat upon it, from whose presence earth and heaven fled away, and no place was found for them. (12) And I saw the dead, the great and the small, standing before the throne, and books were opened; and another book was opened, which is the book of life; and the dead were judged from the things which were written in the books, according to their deeds. (13) And the sea gave up the dead which were in it, and death and Hades gave up the dead which were in them; and they were judged, every one of them according to their deeds. (14) Then death and Hades were thrown into the lake of fire. This is the second death, the lake of fire. (15) And if anyone's name was not found written in the book of life, he was thrown into the lake of fire. (Revelation 20:4-15 NASB)
In summary... an angel lays hold of Satan (the serpent of old), throws him into the abyss, which the angel shuts and seals for a thousand years (20:1-3). John then saw those who had not worshiped the beast, but were beheaded for the gospel, come to life and reign with Christ for the thousand years (20:4-6). When these years are up, Satan will be released from his prison, and will go out to deceive the nations, gathering Gog and Magog from the four corners of the earth (20:7-8). These people will besiege Jerusalem, but will be consumed by fire from heaven (20:9). John then outlines the fate of the devil, the beast, and the false prophet who are to be "thrown into the lake of fire and brimstone" (20:10), describes God's Great White Throne, at which the dead, small and great, stand before God, and are judged according to their work (20:11-13). John then tells us that death and Hades will also be "thrown into the lake of fire" (20:14).
Death and Hades are "thrown into the lake of fire" because no one will ever die again, which means that Hades (Sheol) is no longer necessary as a holding place. It is only after the events described above, that the new heaven and the new earth come into being... God's kingdom that will endure forever.
 Robert L. (Bob)Deffinbaugh. Paul's Perspective on Life and Death (Phil. 1:18b-26).