Plasma electrolytic oxidation (PEO) is a novel surface treatment process to produce thick, dense metal oxide coatings, especially on light metals, primarily to improve their wear and corrosion resistance. The coating manufactured from the PEO process is relatively superior to normal anodic oxidation. It is widely employed in the fields of mechanical, petrochemical, and biomedical industries, to name a few. Several investigations have been carried out to study the coating performance developed through the PEO process in the past. This review attempts to summarize and explain some of the fundamental aspects of the PEO process, mechanism of coating formation, the processing conditions that impact the process, the main characteristics of the process, the microstructures evolved in the coating, the mechanical and tribological properties of the coating, and the influence of environmental conditions on the coating process. Recently, the PEO process has also been employed to produce nanocomposite coatings by incorporating nanoparticles in the electrolyte. This review also narrates some of the recent developments in the field of nanocomposite coatings with examples and their applications. Additionally, some of the applications of the PEO coatings have been demonstrated. Moreover, the significance of the PEO process, its current trends, and its scope of future work are highlighted.