The development of new functional materials requires cutting-edge technologies for incorporating different functional materials without reducing their functionality. Microencapsulation is a method to encapsulate different functional materials at nano- and micro-scales, which can provide the necessary protection for the encapsulated materials. In this review, microencapsulation is categorized into chemical, physical, physico-chemical and microfluidic methods. The focus of this review is to describe these four categories in detail by elaborating their various microencapsulation methods and mechanisms. This review further discusses the key features and potential applications of each method. Through this review, the readers could be aware of many aspects of this field from the fabrication processes, to the main properties, and to the applications of microcapsules.