Lichens are composite organisms consisting of a symbiotic association of a fungus (the mycobiont) with a photosynthetic partner (the phytobiont), usually either a green alga or cyanobacterium. The morphology, physiology and biochemistry of lichens are very different from those of the isolated fungus and alga in culture. Lichens occur in some of the most extreme environments on the Earth and may be useful to scientists in many commercial applications. Over the past 2 decades, there has been a renewed and growing interest in lichens as a source of novel, pharmacologically active biomolecules. This review summarizes the past and current research and development trends in the characterization and use of lichens and their bioactive compounds in traditional medicine and other biopharmaceutical applications of commercial interest. The present review contains 10 illustrations and 188 references compiled from major databases including Science Direct, Chemical Abstracts, PubMed and Directory of Open Access Journals. Lichen morphology, symbiosis, diversity and bioactivities including enzyme inhibitory, antimicrobial, antifungal, antiviral, anticancer, anti-insecticidal and antioxidant actions were reviewed and summarized. Recent progress in lichens and lichen-forming fungi was discussed with emphasis on their potential to accelerate commercialization of lichen-based products. Lichens are an untapped source of biological activities of industrial importance and their potential is yet to be fully explored and utilized. Lichen-derived bioactive compounds hold great promise for biopharmaceutical applications as antimicrobial, antioxidant and cytotoxic agents and in the development of new formulations or technologies for the benefit of human life.