Artemisia annua L. (annual wormwood, Asteraceae) and its secondary metabolite artemisinin, a unique sesquiterpene lactone with an endoperoxide bridge, has gained much attention due to its antimalarial properties. Artemisinin has a complex structure that requires a significant amount of energy for the plant to synthesize. So, what are the benefits to A. annua of producing this unique compound, and what is the ecological role of artemisinin? This review addresses these questions, discussing evidence of the potential utility of artemisinin in protecting the plant from insects and other herbivores, as well as pathogens and competing plant species. Abiotic factors affecting the artemisinin production, as well as mechanisms of artemisinin release to the surroundings also are discussed, and new data are provided on the toxicity of artemisinin towards soil and aquatic organisms. The antifungal and antibacterial effects reported are not very pronounced. Several studies have reported that extracts of A. annua have insecticidal effects, though few studies have proven that artemisinin could be the single compound responsible for the observed effects. However, the pathogen(s) or insect(s) that may have provided the selection pressure for the evolution of artemisinin synthesis may not have been represented in the research thus far conducted. The relatively high level of phytotoxicity of artemisinin in soil indicates that plant/plant allelopathy could be a beneficial function of artemisinin to the producing plant. The release routes of artemisinin (movement from roots and wash off from leaf surfaces) from A. annua to the soil support the rationale for allelopathy.