Object tracking is a key enabling technology in the context of computer-assisted medical interventions. Allowing the continuous localization of medical instruments and patient anatomy, it is a prerequisite for providing instrument guidance to subsurface anatomical structures. The only widely used technique that enables real-time tracking of small objects without line-of-sight restrictions is electromagnetic (EM) tracking. While EM tracking has been the subject of many research efforts, clinical applications have been slow to emerge. The aim of this review paper is therefore to provide insight into the future potential and limitations of EM tracking for medical use. We describe the basic working principles of EM tracking systems, list the main sources of error, and summarize the published studies on tracking accuracy, precision and robustness along with the corresponding validation protocols proposed. State-of-the-art approaches to error compensation are also reviewed in depth. Finally, an overview of the clinical applications addressed with EM tracking is given. Throughout the paper, we report not only on scientific progress, but also provide a review on commercial systems. Given the continuous debate on the applicability of EM tracking in medicine, this paper provides a timely overview of the state-of-the-art in the field.