Liposomes have received a lot of attention during the past 30 years as pharmaceutical carriers of great potential. More recently, many developments have been seen in the area of liposomal drugs-from clinically approved products to new experimental applications. Liposomes, which are biodegradable and essentially nontoxic vehicles, can encapsulate both hydrophilic and hydrophobic materials, and are utilized as drug carriers in drug delivery systems. Liposomes are micro particulate lipid based vesicles which are under extensive investigation as drug carriers for improving the delivery of therapeutic agents. Due to new developments in liposome technology, several liposome-based drug formulations are currently in clinical trial, and recently some of them have been approved for clinical use. Reformulation of drugs in liposomes has provided an opportunity to enhance the therapeutic indices of various agents mainly through alteration in their bio distribution. In this article, basic characteristics, method of preparation and marketed formulations of liposomes have been discussed. The success of liposomes as drug carriers has been reflected in a number of liposome based formulations, which are commercially available, or are currently undergoing clinical trials.