Methane gas hydrates, crystalline inclusion compounds formed from methane and water, are found in marine continental margin and permafrost sediments worldwide. This article reviews the current understanding of phenomena involved in gas hydrate formation and the physical properties of hydrate-bearing sediments. Formation phenomena include pore-scale habit, solubility, spatial variability, and host sediment aggregate properties. Physical properties include thermal properties, permeability, electrical conductivity and permittivity, small-strain elastic P and S wave velocities, shear strength, and volume changes resulting from hydrate dissociation. The magnitudes and interdependencies of these properties are critically important for predicting and quantifying macroscale responses of hydrate-bearing sediments to changes in mechanical, thermal, or chemical boundary conditions. These predictions are vital for mitigating borehole, local, and regional slope stability hazards; optimizing recovery techniques for extracting methane from hydrate-bearing sediments or sequestering carbon dioxide in gas hydrate; and evaluating the role of gas hydrate in the global carbon cycle.