Encapsulation involves the incorporation of food ingredients, enzymes, cells or other materials in small capsules. Applications for this technique have increased in the food industry since the encapsulated materials can be protected from moisture, heat or other extreme conditions, thus enhancing their stability and maintaining viability. Encapsulation in foods is also utilized to mask odours or tastes. Various techniques are employed to form the capsules, including spray drying, spray chilling or spray cooling, extrusion coating, fluidized bed coating, liposome entrapment, coacervation, inclusion complexation, centrifugal extrusion and rotational suspension separation. Each of these techniques is discussed in this review. A wide variety of foods is encapsulated--flavouring agents, acids bases, artificial sweeteners, colourants, preservatives, leavening agents, antioxidants, agents with undesirable flavours, odours and nutrients, among others. The use of encapsulation for sweeteners such as aspartame and flavours in chewing gum is well known. Fats, starches, dextrins, alginates, protein and lipid materials can be employed as encapsulating materials. Various methods exist to release the ingredients from the capsules. Release can be site-specific, stage-specific or signalled by changes in pH, temperature, irradiation or osmotic shock. In the food industry, the most common method is by solvent-activated release. The addition of water to dry beverages or cake mixes is an example. Liposomes have been applied in cheese-making, and its use in the preparation of food emulsions such as spreads, margarine and mayonnaise is a developing area. Most recent developments include the encapsulation of foods in the areas of controlled release, carrier materials, preparation methods and sweetener immobilization. New markets are being developed and current research is underway to reduce the high production costs and lack of food-grade materials.