One of the significant challenges in capsule endoscopy (CE) is to precisely determine the pathologies location. The localization process is primarily estimated using the received signal strength (RSS) from sensors in the capsule system through its movement in the gastrointestinal (GI) tract. Consequently, the wireless CE (WCE) system requires improvement to handle the lack of the capsule instantaneous localization information and to solve the relatively low transmission data rate challenges. Furthermore, the association among the capsule's transmitter position, capsule location, signal reduction, and the capsule direction should be assessed. These measurements deliver significant information for the instantaneous capsule localization systems based on time-of-arrival approach, phase difference of arrival, RSS, electromagnetic, direction of arrival (DOA), and video tracking approaches are developed to locate the WCE precisely. This review introduces the acquisition concept of the GI medical images using the endoscopy with a comprehensive description of the endoscopy system components. Capsule localization and tracking are considered to be the most important features of the WCE system, thus this paper emphasizes the most common localization systems generally, highlighting the DOA-based localization systems and discusses the required significant research challenges to be addressed.