Using this approach you can use one scale per key to improvise over diatonic chords. Provided, of course, you are aware of the "avoid" notes for each chord.
Some books suggest playing a different mode on each diatonic chord, in a song with a key, but for me this is an unnecessary complication. The use of extra modes/scales can be limited to chords that contain non-diatonic notes, e.g. secondary dominants and altered dominant seventh chords.
 
* NOTE: This is the author's own work and represents their interpretation of the song. You may only use this information for private study, scholarship, or research.

Modal v Key Based Approach
Improvising over a Modal song, and a key based song pose two different types of challenge:

Modes of the Major Scale
The C Major scale can be broken down into the seven modes shown below:
Chord
Cmaj7
Dmin7
Esusb9
Fmaj#4
G7
Aminb6
Mode
C Ionian
D Dorian
E Phrygian
F Lydian
G Mixolydian
A Aoelian
B Locrian
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Introduction
Theory Scope

Modal Improvisation
In most modal jazz songs, the harmony is very static - often staying on one chord for several bars. In this situation, you have time and space to improvise using a different mode on each chord. For example, on the Miles Davis song "So What" there are only two chords Dm7 and Ebm7, that last for 16 bars each. Here the first mode of choice would be Dorian:

The challenge here is to be melodically inventive using only the notes from a particular mode, e.g. the respective Dorian mode for a Dm7 and Ebm7 chord. In reality, after a few verses, many musicians use alternate modes and chromatic notes to generate tension, and sustain interest, in a modal jazz song.

 

You may think, this sounds much easier than playing a jazz song with lots of chord and key changes. It is technically easier, but you have to be more melodic and creative to pull it off. For instance, you can't fall back on your favourite licks on a ii-v-i chord progression.

Modes and Chords
Each mode can be used to improvise over a certain chord in a modal jazz song:
For example, if Ebmin7 was on the lead sheet you first choice mode would Eb Dorian, Amaj#4 your first choice mode would be A Lydian, B7 you would use B Mixolydian and so on.

To begin with, it may be easier to think of the modes in relation to their parent Major scale. So D Dorian, is C Major starting on D (2nd note of C Major), E Phrygian is C Major starting on E (3rd note of C major), F Lydian is C Major starting on F (4th note of C major), etc.

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Key based improvisation

In a jazz song with a key centre, the aim is to "play the changes" and improvise smoothly over a series of fast changing chords. To simplify this task, a musician will often break down a song into a number of different keys. For example, on the Miles Davis track "Tune Up" the first section can be interpreted as D, C, and Bb major: *