Here, we present the main features of human acid sphingomyelinase (ASM), its biosynthesis, processing and intracellular trafficking, its structure, its broad substrate specificity, and the proposed mode of action at the surface of the phospholipid substrate carrying intraendolysosomal luminal vesicles. In addition, we discuss the complex regulation of its phospholipid cleaving activity by membrane lipids and lipid-binding proteins. The majority of the literature implies that ASM hydrolyses solely sphingomyelin to generate ceramide and ignores its ability to degrade further substrates. Indeed, more than twenty different phospholipids are cleaved by ASM in vitro, including some minor but functionally important phospholipids such as the growth factor ceramide-1-phosphate and the unique lysosomal lysolipid bis(monoacylglycero)phosphate. The inherited ASM deficiency, Niemann-Pick disease type A and B, impairs mainly, but not only, cellular sphingomyelin catabolism, causing a progressive sphingomyelin accumulation, which furthermore triggers a secondary accumulation of lipids (cholesterol, glucosylceramide, GM2) by inhibiting their turnover in late endosomes and lysosomes. However, ASM appears to be involved in a variety of major cellular functions with a regulatory significance for an increasing number of metabolic disorders. The biochemical characteristics of ASM, their potential effect on cellular lipid turnover, as well as a potential impact on physiological processes will be discussed.