The application of Förster Resonance Energy Transfer (FRET) to the detection and characterization of phase separation in lipid bilayers (both in model systems and in cell membranes) is reviewed. Models describing the rate and efficiency of FRET for both uniform probe distribution and phase separation, and recently reported methods for detection of membrane heterogeneity and determination of phase boundaries, probe partition coefficients and domain size, are presented and critically discussed. Selected recent applications of FRET to one-phase lipid systems, gel/fluid phase separation, liquid ordered/liquid disordered phase separation (lipid rafts), complex systems containing ceramide and cell membranes are presented to illustrate the wealth of information that can be inferred from carefully designed FRET studies of membrane domains.