The rapid development of digitalization, the Internet of Things (IoT), and Industry 4.0 has led to the emergence of the digital twin concept. IoT is an important pillar of the digital twin. The digital twin serves as a crucial link, merging the physical and digital territories of Industry 4.0. Digital twins are beneficial to numerous industries, providing the capability to perform advanced analytics, create detailed simulations, and facilitate informed decision-making that IoT supports. This paper presents a review of the literature on digital twins, discussing its concepts, definitions, frameworks, application methods, and challenges. The review spans various domains, including manufacturing, energy, agriculture, maintenance, construction, transportation, and smart cities in Industry 4.0. The present study suggests that the terminology “3 dimensional (3D) digital twin” is a more fitting descriptor for digital twin technology assisted by IoT. The aforementioned statement serves as the central argument of the study. This article advocates for a shift in terminology, replacing “digital twin” with “3D digital twin” to more accurately depict the technology’s innate potential and capabilities in Industry 4.0. We aim to establish that “3D digital twin” offers a more precise and holistic representation of the technology. By doing so, we underline the digital twin’s analytical ability and capacity to offer an intuitive understanding of systems, which can significantly streamline decision-making processes using the digital twin.