Strain-induced quantum dots (SIQD) confine electrons and holes to a lateral potential minimum within a near-surface quantum well (QW). The potential minimum is located in the QW below a nanometre-sized stressor crystal grown on top of the QW. SIQD exhibit well-resolved and prominently atomic-like optical spectra, making them ideal for experimental and theoretical studies of mesoscopic phenomena in semiconductor nanocrystals.In this report we review the theory of strain-induced confinement, electronic structure, photonics and carrier relaxation dynamics in SIQD. The theoretical results are compared with available experimental data. Electronic structure calculations are mainly performed using the multiband envelope function approach. Many-body effects are discussed using a direct diagonalization method, albeit, for the sake of computational feasibility, within a two-band model.The QD carrier dynamics are discussed in terms of a master equation model, which accounts for the details of the electronic structure as well as the leading photon, phonon and Coulomb interaction processes. We also discuss the quantum confined Stark effect, the Zeeman splitting and the formation of Landau levels in external fields. Finally, we review a recent theory of the cooling of radiative QD excitons by THz radiation. In particular we discuss the resonance charge transfer of holes between piezoelectric trap states and the deformation potential minima. The agreement between the theory and experiment is fair throughout, but calls for further investigations.