Gas grill: soaked wood chips vs. dry wood chips
If you're putting your wood chips directly on a fire, it's good to soak them (and that means real soaking--a few days--not an hour or two). This prevents the wood chips from actually catching fire, which can cause off flavors from combustion chemicals settling back on your food. Tastes kinda like a brand new telephone pole smells on a hot day. Tar/Creosote, and not a nice flavor.

But on a gas grill, if you've got your chips in a pan or wrapped in a fairly tight foil pouch, you needn't worry so much about the chips actually catching on fire. As long as they just smoulder, you're good to go.