We develop the theory of semi-infinite cohomology of graded Lie algebras first introduced by Feigin. We show that the relative semi-infinite cohomology has a structure analogous to that of the de Rham cohomology in Kähler geometry. We prove a vanishing theorem for a special class of modules, and we apply our results to the case of the Virasoro algebra and the Fock module. In this case the zero cohomology is identified as the physical subspace of the Fock module and the no-ghost theorem follows. We reveal the profound relation of semi-infinite cohomology theory to the gauge-invariant free string theory constructed by Banks and Peskin. We then indicate the connection between gauge-invariant interacting string theories and the geometric realizations of the infinite-dimensional Lie algebras.
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