The atom-efficiency of one of the most widely used catalytic reactions for forging C-C bonds, the Tsuji-Trost reaction, is limited by the need of preoxidized reagents. This limitation can be overcome by utilization of the recently discovered palladium-catalyzed C-H activation, the allylic C-H alkylation reaction which is the topic of the current review. Particular emphasis is put on current mechanistic proposals for the three reaction types comprising the overall transformation: C-H activation, nucleophilic addition, and re-oxidation of the active catalyst. Recent advances in C-H bond activation are highlighted with emphasis on those leading to C-C bond formation, but where it was deemed necessary for the general understanding of the process closely related C-H oxidations and aminations are also included. It is found that C-H cleavage is most likely achieved by ligand participation which could involve an acetate ion coordinated to Pd. Several of the reported systems rely on benzoquinone for re-oxidation of the active catalyst. The scope for nucleophilic addition in allylic C-H alkylation is currently limited, due to demands on pK(a) of the nucleophile. This limitation could be due to the pH dependence of the benzoquinone/hydroquinone redox couple. Alternative methods for re-oxidation that does not rely on benzoquinone could be able to alleviate this limitation.