The solubility behaviour of drugs remains one of the most challenging aspects in formulation development. Currently only 8% of the new drug molecules have high solubility and permeability. The solubility behaviour of a drug is key determinant to its oral bioavailability and it is the rate limiting step to absorption of drugs from the gastrointestinal tract. This results in important products not reaching the market or not achieving their full potential. Solid dispersions have attracted considerable interest as an efficient means of improving the dissolution rate and bioavailability of a range of hydrophobic drugs. This article reviews the various preparation techniques for solid dispersion, types of solid dispersions based on molecular arrangement and other aspects such as selection of carriers and methods of characterization and their applications have been discussed.