In recent years, the attention towards artificial emotional intelligence (AEI) replicates complex human ability in artificial intelligence systems for researchers. With the integration of emotional intelligence in artificial intelligence is to revolutionize human-computer interactions, more intuitive and simulate human emotions. AEI assimilates various algorithms like natural language processing, machine learning, deep learning, and computer vision. In order to detect emotional changes, these techniques are employed, where the accuracy rate varies with the implementation of predictable emotion recognition. It is crucial to attend the challenges and ethical concerns associated with emotionally intelligent AI. Harnessing the power of AI is to enhance our lives and foster human-computer relationships. This chapter reviews the most effective and versatile emotion recognition applications and challenges to enhance human-computer interaction in diverse domains.