This paper describes the application of intelligent sensors in the Integrated Systems Health Monitoring (ISHM) as applied to a rocket test stand. The development of intelligent sensors is attempted as an integrated system approach, i.e. one treats the sensors as a complete system with its own physical transducer, A/D converters, processing and storage capabilities, software drivers, self-assessment algorithms, communication protocols and evolutionary methodologies that allow them to get better with time. Under a project being undertaken at the NASA Stennis Space Center, an integrated framework is being developed for the intelligent monitoring of smart elements associated with the rocket tests stands. These smart elements can be sensors, actuators or other devices. Though the immediate application is the monitoring of the rocket test stands, the technology should be generally applicable to the ISHM vision. This paper outlines progress made in the development of intelligent sensors by describing the work done till date on Physical Intelligent sensors (PIS) and Virtual Intelligent Sensors (VIS).