The extent of inequality that people perceive in the world is often a stronger predictor of individual and societal outcomes than the level of inequality that actually exists. It is therefore imperative for researchers to theoretically conceptualize and empirically operationalize perceived inequality in a coherent and consistent manner. However, the lack of consensus on what constitutes perceived inequality can lead researchers to use the same words to study different phenomena. What seem like minor methodological decisions made in the study of inequality can substantially influence the outcomes and conclusions that researchers dra from their work. In this review, we draw on a wide range of interdisciplinary work, including from social and cognitive psychology, economics, political science, and sociology, to unpack the assumptions researchers often make. We develop the four questions framework which illustrates the important theoretical and empirical decisions researchers are recommended to address when studying perceived inequality: (1) What kind of inequality? (2) What level of analysis? (3) What part of the distribution? and (4) What comparison group? We posit that this framework provides the conceptual clarity necessary for understanding when, how, and why perceptions of inequality affect individuals and societies.