The hair research field has seen great improvement in recent decades, with in vitro hair follicle (HF) models being extensively developed. However, due to the cellular complexity and number of various molecular interactions that must be coordinated, a fully functional in vitro model of HFs remains elusive. The most common bioengineering approach to grow HFs in vitro is to manipulate their features on cellular and molecular levels, with dermal papilla cells being the main focus. In this study, we focus on providing a better understanding of HFs in general and how they behave in vitro. The first part of the review presents skin morphology with an emphasis on HFs and hair loss. The remainder of the paper evaluates cells, materials, and methods of in vitro growth of HFs. Lastly, in vitro models and assays for evaluating the effects of active compounds on alopecia and hair growth are presented, with the final emphasis on applications of in vitro HFs in hair transplantation. Since the growth of in vitro HFs is a complicated procedure, there is still a great number of unanswered questions aimed at understanding the long-term cycling of HFs without losing inductivity. Incorporating other regions of HFs that lead to the successful formation of different hair classes remains a difficult challenge.