The in vitro engineering of functionally developed biological cartilage substitutes, based on cells and appropriate structural and soluble factors, is an attractive concept for the clinical treatment of cartilage injuries and degeneration. The field of cartilage tissue engineering has developed strongly in the last few years, bringing together the scientific, clinical and commercial interests of highly interdisciplinary communities. However, engineered grafts are still far from being the standard of care for cartilage repair. In this review we present some of the issues challenging the reproducible engineering of functional cartilage templates starting from human cells. We then discuss the need to identify the mode of action of cartilage tissue engineering approaches, which in turn is expected to define potency markers and quality controls for grafts capable of inducing durable cartilage regeneration. Finally, we propose the use of engineered cartilage tissues not only as implants to be implemented in the clinic, but also as models to understand mechanisms and processes related to cartilage development and repair. The knowledge generated using these models will be instrumental in moving to the next generation of cartilage repair approaches, namely those inducing regeneration in situ, based on the recruitment of resident cells.