Liposomes have been widely investigated since 1970 as drug carriers for improving the delivery of therapeutic agents to specific sites in the body. As a result, numerous improvements have been made to make this technology potential the treatment of certain diseases in the clinics. This review mainly focused on various aspects related to the vesicular system, including method of preparation, stabilization, drawbacks, and applications. Various types of vesicular systems such as liposomes, niosomes, transfersomes, pharmacosomes, and nanoparticle have been discussed briefly along with some other emerging vescicular systems (photosomes, archaesomes, genosomes, cryptosomes, discomes) focusing on cell specific gene transfer, photodynamic therapy and ligand mediated drug targeting. Present applications of the liposomes are in the immunology, dermatology, vaccine adjuvant, eye disorders, brain targeting, infective disease and in tumour therapy. The new developments in this field are of specific binding properties of a drug-carrying liposome to a target cell such as a tumor cell and specific molecules in the body (antibodies, proteins, peptides etc), stealth liposomes which are especially used as carriers for hydrophilic (water soluble) anticancer drugs like doxorubicin, mitoxantrone and bisphosphonate-liposome mediated depletion of macrophages. This review would help researchers working in the area of liposomal drug delivery.