This paper is aimed at giving a detailed review on the recent advancements in lithium ion battery technology focusing on the underlying principle; design and configuration; materials; fabrication techniques; application; and challenges of lithium ion batteries (LIBs). The first rechargeable Li-ion batteries with cathode of layered TiS2 and anode of metallic Li was reported by Whittingham while working at Exxon in 1976 but this invention was not successful due to the problems of Li dendrite formation and short circuit upon extensive cycling and safety concern. However, there was a turnaround when Goodenough offered a theoretical framework for possible materials for effective intercalation/deintercalation and Yohsino carried out the first safety test on Li-ion batteries to demonstrate their enhanced safety features. LIBs consist of two electrodes, anode and cathode, immersed in an electrolyte and separated by a polymer membrane; and works by converting chemical energy into electrical energy and vice versa through charging and discharging processes. Most of the LIB models are derived from the porous electrode and concentrated solution theories which mathematically describe charge/discharge and species transport in the solid and electrolyte phases across a simplified 1D spatial cell structure. The cathode materials can be categorized based on voltage, typically 2-Volt, 3-Volt, 4-Volt and 5-Volt and currently LiCoO2 and LiFePO4 are most widely used in commercial Li-ion batteries because of their good cycle life (>500 cycles). Carbon is a dominant anode material although there are other materials available such as Nexelion; the choice of anode materials significantly influences the electrochemical performances, including cyclability, charging rate, and energy density of Li-ion batteries. A typical liquid electrolyte is a solution of lithium salts in organic solvents which must be carefully chosen to withstand the redox environment at both cathode and anode sides and the voltage range involved without decomposition or degradation. Separators are essential components of Li-ion batteries and play a critical role to avoid direct physical contact between the cathode and anode, and prevents short circuit to occur. A number of benefits are offered by this technology such as lightweight, high energy density power sources for a variety of devices. However, cost is one of the major challenges in the development of LIBs, another issue that is yet to be resolved is that the battery capacity tends to fade upon electrochemical cycling. Hence, if the opportunities embedded in the LIB technology is properly harnessed, there will create an economically viable environment.