Lithium-ion batteries (LIBs) remain at the forefront of energy research due to their capability to deliver high energy density. Understanding their degradation mechanism has been essential due to their rapid engagement in modern electric vehicles (EVs), where battery failure may incur huge losses to human life and property. The literature on this intimidating issue is rapidly growing and often very complex. This review strives to succinctly present current knowledge contributing to a more comprehensible understanding of the degradation mechanism. First, this review explains the fundamentals of LIBs and various degradation mechanisms. Then, the degradation mechanism of novel Li-rich cathodes, advanced characterization techniques for identifying it, and various theoretical models are presented and discussed. We emphasize that the degradation process is not only tied to the charge-discharge cycles; synthesis-induced stress also plays a vital role in catalyzing the degradation. Finally, we propose further studies on advanced battery materials that can potentially replace the layered cathodes.