In this paper the present understanding of the origin of ferromagnetic response that has been detected in a number of diluted magnetic semiconductors and diluted magnetic oxides at room temperature is outlined. It is argued that in these systems, owing to a typically small solubility of magnetic ions, crystallographic or chemical phase separation into regions with a large and a small concentration of magnetic component takes place. The ferromagnetic signatures then come from the regions with a large concentration of magnetic ions, which show non-zero spontaneous magnetization up to the blocking temperature, whose magnitude is proportional to the nanocrystal volume and magnetic anisotropy. Novel methods enabling a control of nano-assembling of magnetic nanocrystals in non-conducting matrices as well as possible functionalities of these spatially modulated magnetic systems are described. We also discuss phase separations into paramagnetic and ferromagnetic regions, which are driven by the Anderson-Mott localization and/or competing ferromagnetic and antiferromagnetic interactions. Finally, the question whether the high temperature ferromagnetism is possible in materials without magnetic ions is addressed.