Upon transmission of visible light through composites comprising of a transparent polymer matrix with embedded particles, the intensity loss by scattering is substantially reduced for particle diameters below 50–100 nm (nanoparticles, nanosized particles). As a consequence, related materials (nanocomposites) have found particular interest in optical studies. The first part of this article deals with a historical survey on nanoparticles and nanocomposites and the importance of small particle sizes on their optical properties. The second part focuses on results from our laboratory concerning nanocomposites with extremely high or low refractive indices and dichroic nanocomposites and their application in bicolored liquid crystal displays (LCD). The inorganic colloids required for these studies (lead sulfide, iron sulfides, gold, and silver) were prepared in situ in presence of a polymer or isolated as redispersable metal colloids modified at the surface with a self‐assembled monolayer (SAM) of an alkanethiol. The nanocomposites themselves were finally obtained by coprecipitation, spin coating, solvent casting or melt extrusion, with poly(ethylene oxide), gelatin, poly(vinyl alcohol) and polyethylene as matrix polymers.