Hyperthermia is a noninvasive method that uses heat for cancer therapy where high temperatures have a damaging effect on tumor cells. However, large amounts of heat need to be delivered, which could have negative effects on healthy tissues. Thus, to minimize the negative side effects on healthy cells, a large amount of heat must be delivered only to the tumor cells. Magnetic hyperthermia (MH) uses magnetic nanoparticles particles (MNPs) that are exposed to alternating magnetic field (AMF) to generate heat in local regions (tissues or cells). This cancer therapy method has several advantages, such as (a) it is noninvasive, thus requiring surgery, and (b) it is local, and thus does not damage health cells. However, there are several issues that need to achieved: (a) the MNPs should be biocompatible, biodegradable, with good colloidal stability (b) the MNPs should be successfully delivered to the tumor cells, (c) the MNPs should be used with small amounts and thus MNPs with large heat generation capabilities are required, (d) the AMF used to heat the MNPs should meet safety conditions with limited frequency and amplitude ranges, (e) the changes of temperature should be traced at the cellular level with accurate and noninvasive techniques, (f) factors affecting heat transport from the MNPs to the cells must be understood, and (g) the effect of temperature on the biological mechanisms of cells should be clearly understood. Thus, in this multidisciplinary field, research is needed to investigate these issues. In this report, we shed some light on the principles of heat generation by MNPs in AMF, the limitations and challenges of MH, and the applications of MH using multifunctional hybrid MNPs.