@Srichakradhar at your suggestion, posting answer related to your question on gitter to here on StackOverflow as well to benefit the community as a whole!:
"...regarding your question on phrase lists, happy to speak high-levelly on what the feature does :)
@srichakradhar
So ultimately the goal with LUIS is to understand the meaning of the user’s input (utterance), and through calculations, it returns to you the value of how confident it is about the meaning of the input. Using phrase lists is one of the ways to improve the accuracy of determining the meaning of the user’s utterance
—more specifically, when adding features to a phrase list, it can put more weight on the score of an intent or entity.
Using a couple of examples to illustrate the high-level concept of how features help determine intent/entity score, and in turn predict the user’s utterance’s meaning:
For example, if I wanted to describe a class called Tablet, features I could use to describe it could include screen, size, battery, color, etc. If an utterance mentions any of the features, it’ll add points/weight to the score of predicting that the utterance’s meaning is describing Tablet. However, features that would be good to include in a phrase list are words that are maybe foreign, proprietary, or perhaps just rare. For example, maybe I would add, “SurfacePro”, “iPad”, or “Wugz” (a made-up tablet brand) to the phrase list of Tablet. Then if a user’s utterance includes “Wugz”, more points/weight would be put onto predicting that Tablet is the right entity to an utterance.
Or maybe the intent is Book.Flight and features include “Book”, “Flight”, “Cairo”, “Seattle”, etc. And the utterance is “Book me a flight to Cairo”, points/weight towards the score of Book.Flight intent would be added for “Book”, “flight”, “Cairo”.
Now, regarding interchangeable vs. non-interchangeable phrase lists.
Maybe I had a Cities phrase list that included “Seattle”, “Cairo”, “L.A.”, etc. I would make sure that the phrase list is non-interchangeable, because it would indicate that yes “Seattle” and “Cairo” are somehow similar to one-another, however they are not synonyms—I can’t use them interchangeably or rather one in place of the other. (“book flight to Cairo” is different from “book flight to Seattle”)
But if I had a phrase list of Coffee that included features “Coffee”, “Starbucks”, “Joe”, and marked the list as interchangeable, I’m specifying that the features in the list are interchangeable. (“I’d like a cup of coffee” means the same as “I’d like a cup of Joe”)
For more on Phrase Lists - Phrase List features in LUIS
For more on improving prediction - Tutorial: Add phrase list to improve predictions"