We review the current theory of how galaxies form within the cosmological framework provided by the cold dark matter paradigm for structure formation. Beginning with the pre-galactic evolution of baryonic material we describe the analytical and numerical understanding of how baryons condense into galaxies, what determines the structure of those galaxies and how internal and external processes (including star formation, merging, active galactic nuclei etc.) determine their gross properties and evolution. Throughout, we highlight successes and failings of current galaxy formation theory. We include a review of computational implementations of galaxy formation theory and assess their ability to provide reliable modelling of this complex phenomenon. We finish with a discussion of several "hot topics" in contemporary galaxy formation theory and assess future directions for this field.

58 pages, to appear in Physics Reports. This version includes minor corrections and a handful of additional references