Nanoparticle systems are an intense subject of research for various biomedical applications. Colloidal suspensions of magnetic nanoparticles are of special interest, particularly in bioimaging, and more recently, in Magnetic Fluid Hyperthermia (MFH). MFH promises to be a viable alternative in the treatment of localized cancerous tumors. The treatment consists of locally injecting magnetic nanoparticles in fluid suspension into the tumor site and exposing the site to an oscillating magnetic field, where nanoparticles dissipate energy in the form of heat, causing a localized rise in temperature and tumor cell death. Here we will review methods of magnetic nanoparticle synthesis, and the role of the nanoparticle surface coating in achieving colloidal stability, minimizing toxicity, and targeting. Finally, we review in vitro and in vivo MFH experiments, and clinical studies in the treatment of glioblastoma multiforme and prostate cancer.